Standard Bank of South Africa Limited and Global Resorts South Africa (Pty) Ltd (18/LM/Mar04) [2004] ZACT 33 (6 May 2004)

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Competition Law

Brief Summary

Competition — Merger approval — Unconditional approval of merger between Standard Bank consortium and Global Resorts South Africa (Pty) Ltd — Consortium acquiring 60.11% of GRSA's share capital — No significant competition concerns identified as post-merger control remains with shareholders without interests in the hotel and gaming industry — No public interest issues affecting the conclusion — Merger approved unconditionally.

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
________________________________________________________________
Reasons for Decision 
________________________________________________________________
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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