COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 18/LM/Mar04
In the large merger between:
Standard Bank of South Africa Limited and Others
and
Global Resorts South Africa (Pty) Ltd
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Reasons for Decision
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Approval
1. On 5 May 2004 the Tribunal unconditionally approved
the merger between a consortium, including Standard
Bank of South Africa Limited, and Global Resorts South
Africa (Pty) Limited. The reasons for this decision follow:
The transaction
2. A consortium consisting of investment companies and
trusts will acquire 60.11% of the issued share capital of
Global Resorts South Africa (Pty) Limited. The
consortium members have entered into a consortium
agreement, which is not as rigid as a shareholders
agreement would be, since the ultimate purpose is to list
the target firm on the JSE Securities Exchange.
The parties
3. The members of the consortium, who are the primary
acquiring firms, are Standard Bank of South Africa
Limited (“Standard Bank”), Grant Thornton Capital (Pty)
Limited (“GTC”), Coronation Asset Management (Pty)
Limited (“CAM”), RMB Asset Management (Pty) Limited
(“RMBAM”), Allan Gray Limited (“Allan Gray”), the
Summit Trust (“Summit”), the Faraway Trust (“Faraway”)
and the Riviera Trust (“Riviera”).
4. The primary target firm is Global Resorts South Africa
(Pty) Limited (“GRSA”). Its major shareholders are RMB
Holdings Limited, Genbel Securities Limited and Aquila
Growth Limited.
5. The current shareholders are diluting their holdings in
GRSA through the transaction. Prior to the transaction
the shareholdings were as follows:
i. RMB Holdings Limited – 48.39%
ii. Genbel Securities Limited – 25.95%
iii. Aquila Growth Limited – 23.43%
iv. Ernest Guillame Joubert – 1.59 %
v. Johannes Eksteen Forrer – 0.56%
vi. Anthony Edward Putergill – 0.08%
6. Post merger the shareholdings will be as follows:
i. the acquiring consortium – 60.11%, broken down as follows
a. Allan Gray – 18.01%
b. RMBAM – 18.01%
c. CAM – 13.11%
d. GTC – 1.64%
e. Standard Bank – 6.55%
f. Management – 2.77%
ii. Sanlam (Genbel Securities Limited) – 25.95 %
iii. Aquila Growth Limited – 11.71 %
iv. Ernest Guillame Joubert, Johannes Eksteen Forrer and
Anthony Edward Putergill –2.23%
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The rationale
7. The parties submit that the transaction provides a sound investment
opportunity for the acquiring firms.
Evaluating the merger
The relevant market
8. GRSA is active in the hotel and gaming industry. Its operating subsidiaries
are:
8.1 The Grand Palm Hotel and Casino in Botswana,
8.2 Graceland Hotel, Casino and Country Club in Mpumalanga, and
8.3 Caesars Gauteng Hotel, Casino and Convention Resort.
9. For purposes of a competition analysis it is important to ascertain who will
control GRSA post the transaction, until it is listed. Although the consortium
will hold 60% of the shares, we are advised that the members will hold the
shares in the consortium in the following proportions:
9.1 Allan Gray 29.97%
9.2 RMBAM 29.97%
9.3 Coronation 21.82%
9.4 GTC 2.73%
9.5 Standard Bank 10.90%
9.6 Management 4.61% 1
10. Furthermore, we are told that RMBAM and Allan Gray will not exercise their
respective voting rights and instead have ceded these rights to the other
members of the consortium, pro rata their shareholdings.
11. Precisely why RMBAM and Allan Gray have done this is not clear. The
rationale appears to relate to the “cut throat“ nature of the asset management
business rather than being aimed at circumventing the provisions of the
Competition Act. 2
12. The parties submit that neither RMBAM or Allan Gray have controlling
interests in other casinos. For this reason, we have no reason to question the
explanation provided by the parties.
1 Management are acquiring the shares through the Summit, Riviera and Faraway Trusts.
2 Act 89 of 1998, as amended.
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13. Notwithstanding the waiver of voting rights by RMBAM and Allan Gray, none
of the other consortium members will exceed 50% in respect of voting rights.
Hence GRSA will be controlled by the remaining shareholders, collectively.
14. Since we are advised that none of these shareholders have interests in the
hotel and gaming industry, there is no product market overlap and a definitive
market definition is not required.
15. We are also informed that RMBAM, Allan Gray and CAM are acquiring these
shares as agents for their individual clients. We have been given a copy of
the lists containing the names of these clients. 3 Again, no competition
concerns arise as none of these underlying investors, which are mostly
pension funds, have a significant overall interest in GRSA.
Impact on competition
16. The transaction will not result in any changes in the structure of the market.
GRSA will not exit the market. Thus there are no competition concerns.
17. The Commission investigated the vertical relationship between Grant
Thornton Tourism, Hospitality and Leisure Consulting (Pty) Ltd (“GTT”), a
subsidiary of GTC and GRSA. GTT is a speciality consultancy firm and has
provided its services to GRSA in respect of feasibility studies and financial
analysis.
18. The Commission concluded that GRSA constitutes less than 1% of GTT’s
business. We are satisfied that this amount is not significant enough to
incentivise any foreclosure conduct.
Public interest concerns
19. The transaction will have no effect on employment.
20. At the hearing, the representative from GRSA stated that the transaction will
not affect the empowerment structures within GRSA and that the relevant
gaming boards have been consulted by the parties.
Conclusion
3 The parties have claimed confidentiality over these lists. Again we are told that this information
is confidential because the asset management companies do not divulge the identities of their
clients, due to the competitive nature of the asset management business.
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21. We conclude that it is unlikely that the merger will lead to a substantial
lessening of competition in the market. There are no pubic interest issues,
which affect this conclusion.
22. The transaction is therefore unconditionally approved.
06 May 2004
N. Manoim Date
Concurring: U Bhoola, T Orleyn
For the merging parties: Webber Wentzel Bowens.
For the Commission: K Ramathula, Mergers and Acquisitions division,
Competition Commission.
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