COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 39/LM/Apr02
In the large merger between:
Genbel Securities Limited
and
Genbel South Africa Limited
Reasons for Decision
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APPROVAL
On 23 July 2002 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Genbel Securities (Pty) Ltd and Genbel South
Africa Limited in terms of section 16(2)(a). The reasons for the approval of the
merger appear below.
The Parties
1. The acquiring firm is Genbel Securities (Pty) Ltd (“Gensec”), a wholly
owned subsidiary of Sanlam Limited (“Sanlam”). While Sanlam has over 30
subsidiaries in South Africa, the only subsidiary that need concern us is
Gensec. Gensec is an investment holding company which engages in
various activities on behalf of Gensec Bank, one of its subsidiaries.
2. Gensec Bank is an investment bank, engaged in wealth creation, both for
its clients and itself through the management of financial risk. It specialises
in the wholesale provision of derivativebased risk management products to
the savings industry and the arrangement of debt and equity finance for
corporates, as well as being a manager of private equity funds.
3. The target firm is Genbel South Africa Limited (“Genbel”), a closed end
investment trust. It is a public company, primarily listed under the
Investment Trusts sector on the JSE Securities Exchange, with secondary
listings on the London, Brussels and Namibian Stock Exchanges. It
engages in the management of assets on behalf of its shareholders. Aimed
at the retail investor, it provides a means for the investor to gain exposure
to the performance of an underlying security, insofar as retail investors
could purchase shares in Genbel, which, by investing in companies with
exceptional longterm growth prospects, enables investors to gain access to
a diversified portfolio of topperforming shares. It provides an alternative to
investors wishing to invest in unit trusts .
Rationale for the Transaction
4. The Board of Directors of Genbel took a decision to discontinue the
business of Genbel which was found to be unprofitable. Moreover, the
imposition of Capital Gains Tax meant that shareholders of Genbel were
effectively being taxed twice, further undermining Genbel’s viability.
The Merger Transaction
5. Gensec is acquiring 100% of the issued share capital of Genbel. Post
merger, Genbel will be delisted and the Genbel shareholders paid out an
appropriate cash value for their shares. Prior to the merger Gensec,
through Gensec Bank, held 30.38% of Genbel and was its largest
shareholder.
6. Genbel will postmerger be wholly owned by Gensec and, though it will
retain its portfolio, cease to exist as a vehicle for investors to trade in the
market.
Impact on competition
7. Postmerger, Genbel will effectively exit the market as an investment
vehicle. This is because although it will continue to exist as a company
owning a portfolio of shares, it will have only one shareholder. Since it will
cease to have a broad class of shareholders it will no longer compete in the
asset management market. Accordingly, no competitive concerns are
raised by this transaction.
Conclusion
We conclude that the merger will not lead to a substantial lessening of
Conclusion
We conclude that the merger will not lead to a substantial lessening of
competition. The Tribunal therefore approves the transaction unconditionally.
There are no public interest concerns which would alter this conclusion.
_____________ 29 July 2002
N. Manoim Date
Concurring: D.H. Lewis, M. Moerane
For the merging parties: Webber Wentzel Bowens Attorneys
For the Commission: A. Coetzee, instructed by Mergers Division,
Competition Commission