Genbel Securities Limited and Genbel South Africa Limited (39/LM/May02) [2002] ZACT 48 (29 July 2002)

55 Reportability
Competition Law

Brief Summary

Competition Law — Merger Approval — Merger between Genbel Securities Limited and Genbel South Africa Limited approved by the Competition Tribunal — Gensec acquiring 100% of Genbel’s issued share capital, leading to Genbel’s de-listing and exit from the market as an investment vehicle — Tribunal finds no substantial lessening of competition resulting from the merger — No public interest concerns affecting approval.

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
________________________________________________________________
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