COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 07/LM/Jan02
In the large merger between:
Caixa Geral de Depositos S. A.
and
Mercantile Lisbon Bank Holdings Ltd
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Reasons for Decision
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APPROVAL
On 13 February 2002 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Mercantile Lisbon Bank Holdings and
Caixa Geral de Depositos S. A. in terms of section 16(2)(a). The reasons for the
approval of the merger appear below.
The parties
The acquiring firm, Caixa Geral de Depositos S. A. (“CGD”), is a large
Portuguese financial group, a whollyowned subsidiary of the government of
Portugal.1 It has a network of some 1000 branches across Africa, Europe,
America and Asia. The parties have informed us that CGD has no interest in
South Africa other than its existing 28.14% shareholding in MBHL.
The target firm is Mercantile Lisbon Bank Holdings (“MLBHL”), a company
engaged in the financial services industry providing retail banking and financial
services.
The merger transaction
Caixa Geral de Deposito S. A. (“CGD”) is acquiring a 64.14% interest in
Mercantile Lisbon Bank Holdings (“MLBHL”). This is being effected by means of
an injection of R120 million of new capital into MBHL by way of an issue of new
1 Memo to Registrar of Banks dated 27 November 2001.
MBHL shares to CGD. Prior to the recapitalisation CGD held 28.14% of the
shareholding in MBHL. The division of shareholding was as follows:
Caixa Geral de Dep ósitos, SA 28.1
Crewler Investments (Proprietary) Limited 14.2
Genbel Securities Limited 11.1
Goldrush Investments No.8 (Proprietary) Limited 3.8
Goldrush Investments No.8 (Proprietary) Limited 3.7
Postmerger, the share structure will be:
Caixa Geral de Dep ósitos, SA 64.1
Crewler Investments (Proprietary) Limited 2 7.1
Genbel Securities Limited 5.6
Goldrush Investments No.8 (Proprietary) Limited 3 1.9
Goldrush Investments No.8 (Proprietary) Limited 3 1.8
Rationale for the Transaction
MLBHL has been suffering losses over the past year and its capital adequacy
ratio as required by the Registrar of Banks falls far below the required level 4.
The parties maintain that this recaptilisation effectively “rescues” MLBHL by
injecting R120 million of new capital into MLBHL. It will also enable the return to
profitability of MLBHL. 5
2 Pre and post merger, controlled by Hollard Holdings (Pty) Ltd
3 Pre and post merger, controlled by the South African Railway and Harbours Workers’ Union
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4 In terms of the capital adequacy requirements of the Banks Act, 94 of 1990.
5 Mercantile’s registry and share dealing business is also being sold. This is the subject of a separate
notification.
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The relevant product market
The acquiring firm is engaged in the banking and financial services sector. Its
range of services include commercial banking, insurance, capital markets,
specialized credit, advisory services, venture capital and investment banking. Its
activity in South Africa, however, is limited to the interest it already holds in
MLBHL. It does not directly provide any products or services in South Africa.
MLBHL has recently refocused its business into five areas, namely Alliance
Banking; Branch Banking; Securities Banking; Treasury and Specialized
Finance. The merging parties estimate that it has a 0.29% market share of the
banking industry generally. 6
The Commission determined that insofar as CGD does not conduct any financial
or banking activities in South Africa, no further analysis was required.
Geographical Market
There is no product overlap since CGD’s business activities do not extend to
South Africa.
Public Interest Issues
Although the parties have submitted that future retrenchments may result from a
new strategic direction, there would be none flowing from this transaction. Indeed
previous rationalization efforts illustrate that same is not unique to this
transaction. The parties have assured that should the transaction not proceed,
more retrenchments would follow as a result of MLBHL’s inevitable cessation of
its operations.
The SARB is of the view that the proposed transaction will not be detrimental to
the public interest and will in fact enhance the services to depositors. Insofar as
the transaction willl improve MLBHL’s financial position, it will maintain the
stability of the financial system as a whole. It further facilitates the inflow into the
country of foreign funds.
6 Annexure A to Competititveness Report (as at November 2001)
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Conclusion
The Tribunal endorses the Commission’s finding that this transaction will not
substantially lessen or prevent competition in the relevant market and
accordingly approves the transaction unconditionally.
_____________ 19 February 2002
N.M. Manoim Date
Concurring: M. Holden, P. Maponya
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