COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 31/LM/Jul03
In the large merger between:
Sun Air Limited & Kersaf Investments Limited
and
Sun International (SA) Holdings (Pty) Ltd & Sun International (SA) Ltd
Reasons for Decision
APPROVAL
On 20 August 2003 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Sun Air Limited, Kersaf Investments
Limited and Sun International (SA) Holdings (Pty) Ltd , Sun International (SA) Ltd
in terms of section 16(2)(a). The reasons for the approval of the merger appear
below.
The Parties
1. The acquiring firm is Sun Air Limited (“SAL”), a
subsidiary of Kersaf Investments Limited (“Kersaf”). SAL is
an investment holding company which holds only shares
in SISA Holdings. As such, it has no competitors, nor
customers.
2. Kersaf is a public company listed on the JSE. It is an investment
holding company, having interests in gaming, resorts and casinos both
locally and abroad. It also, in conjunction with its subsidiary, Sun
International Management Limited (“SIML”), renders some management
functions to its group companies which operate resorts or casinos. All the
SISA operations in RSA are managed by SIML.
3. Kersaf’s shareholders are: Old Mutual Life Assurance Company (South Africa)
(14.68%), Public Investment Commission (7.17%) and Coronation Life (6.48%).
4. Kersaf also directly controls Sun International Travel (Pty) Ltd, Stardust
Enterprises and National Casino Resort Manco Holdings (Pty) Ltd. It has
indirect control over 30 other companies, which are listed in the papers,
and irrelevant for the purposes of this transaction.
5. The target firms are Sun International (South Africa) Holdings (“SISA
Holdings”) and its subsidiary, Sun International (South Africa) Limited
(“SISA”).
6. SISA Holdings is an investment holding company, holding only shares in
SISA. SISA is the leading casino, resort and hotel operator in South
Africa, with investments in major resorts, gaming complexes and other
casinos and hotels. These resorts include Sun City, the Table Bay Hotel in
CT, Zimbali Lodge in KZN and the Wild Coast Sun in the Eastern Cape. It
is described as an operating and investment holding company, insofar as
its holds interests in other operating companies in the gambling, hotels
and resorts markets. Its shareholders are as follows:
7. The SISA Group trades through different corporate structures in order to
enable regional ownership and Black Economic Empowerment.
The Merger Transaction
8. This transaction entails SAL acquiring the remaining 49.9% of the issued
share capital of SISA Holdings from North West Development Corporation
(“NWDC”). It already owns 50.1% of the issued share capital of SISA
Holdings. Up until now, NWDC and SAL jointly controlled SISA Holdings.
With this transaction, the shareholders agreement between SAL and
NWDC is being terminated and SAL will thus be the sole shareholder of
SISA Holdings and therefore in sole control of this company. The
transaction will further give Kersaf indirect control over SISA, which is
engaged in the gaming and hospitality industries in South Africa.
9. Taking into account it’s indirect holdings in its various subsidiaries whom
themselves have interests in SISA, Kersaf is acquiring an effective 18.6%
in SISA, bringing its total effective interest in SISA to 62.2%, up from
43.6% premerger.
Rationale for the Transaction
10. NWDC was obliged to dispose of its shareholdings in SISA Holdings in
accordance with section 13 of the National Gambling Act, 1996, which
regulates the ability of government bodies to retain investments in certain
industries.
11. Management and control already vests in Kersaf and it wants to
consolidate its group structure by further investing in its core activity of
gaming and resorts as well as in SISA assets. NWDC is in judicial
management.
The Relevant Market
12. Since the acquiring firms are investment holding companies and SISA
operates in the gaming and hotels and casinos market, there is no product
overlap. Furthermore we need not define a market since this transaction
concerns an acquisition of shares within the Kersaf group with no
competitive consequences, therefore no market analysis is required.
Impact on competition
13. The parties contend that this transaction is merely a transfer or acquisition
of shareholding and a vesting of sole control. The operational structure of
the company will remain intact. We agree that noaggregation of market
shares or acquisition of market power is occurring. No competitor is being
removed from the market nor is the market structure being altered. is
acquiring direct sole control over SISA holdings and Kersaf is acquiring
indirect control over SISA.
We accordingly conclude that this merger will not lead to a substantial lessening
of competition. There are no public interest concerns which would alter this
conclusion. The merger is therefore approved unconditionally.
_____________ 26 August 2003
D. Lewis Date
Concurring: N. Manoim, T.Orleyn
For the merging parties: Edward Nathan Friedland Attorneys
For the Commission: L. Blignaut, M. Wo rsley, Competition Commission