COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 42/LM/Jun04
In the large merger between:
BOE Holdings Limited
and
Company Unique Finance (Pty) Limited
Reasons for Decision
Approval
1. On 14 July 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving unconditionally the transaction between the abovementioned parties. The
reasons for the Tribunal’s decision follows.
The Parties
2. The primary acquiring firm is BoE Holdings Ltd (“BoE”), a holding company
controlled by Nedcor (Pty) Ltd (“Nedcor”). The Nedcor group controls a number of
firms none of which is relevant for purposes of this transaction.
3. The primary target firm is Company Unique Finance (Pty) Ltd (“CUF”) whose
shareholding is as follows: BoE (42.7%), Nail (26.4%) and Metlife (26.4%). CUF
controls Afri Brokers (Pty) Ltd (“Afribrokers”).
The Transaction
4. The proposed transaction involves BoE Holdings acquiring CUF thus resulting in
the former exercising control over the latter. 1 BoE will be the sole shareholder of
CUF following this transaction. 2
Rationale for the Transaction
5. In 1996 BoE, Nail and Metlife rescued African Bank from curatorship (after
concluding an agreement with the South African government for the rehabilitation of
African Bank). After this rescue African Bank continued to experience difficulties
competing in the formal banking sector; this combined with the adverse economic
1 The Commission, prior to the present transaction, unconditionally approved an intermediate merger
(the first transaction) between CUF and the Ring Fenced Business of African Bank Ltd (“AFRFB”).
Pursuant to the intermediate merger, CUF controls ABRFB. We will, however, focus on the present
transaction (i.e., transaction two) for purposes of competition analysis.
transaction (i.e., transaction two) for purposes of competition analysis.
2 See the transcript dated 14 July 2004 (page 2).
environment in the late 1990’s led to a deterioration in the quality of African Bank’s
debtors book.
6. African Bank Investments Ltd (“ABIL”) bought the shares in African Bank, but had
no intention of carrying on with African Bank’s original business of mortgage and
asset based lending. ABIL wished to introduce a new core business of term lending
into African Bank. No purchasers were found for the old African Bank business
(“ABRFB”) and it was accordingly decided to wind this business down. The entire
African Bank’s debtors’ book, together with all of its related rights and obligations,
was ringfenced within African Bank. BoE, Nail and Metlife assumed responsibility for
the ringfenced business (“ABRFB”). 3 As a result, BoE, Nail and Metlife appointed a
manager, namely CUF, to wind down the AFBRB book. CUF outsourced this to Loan
Management Services (“LMS”), a division of CUF. 4
7. The Registrar of Banks requested BoE and African Bank to transfer ABRFB out of
African Bank as the risks and rewards of the ABRFB do not lie with African Bank. To
achieve this, African Bank, BoE, Nail and Metlife negotiated during 2003 and
concluded an agreement for the transfer of the ABRFB from African Bank to CUF. 5
This resulted in the present transaction.
The parties’ activities
8. BoE is controlled by Nedcor, which provides the entire range of banking services.
9. CUF provides loan book administration services, which include loan instalment
collection, recovery of capital amounts of nonperforming debts through the legal
process and the monthtomonth reporting of these activities. CUF outsources the
loan book administration services to its former internal division, LMS, on an agency
basis. CUF provides loan book administration services to ABRFB through LMS.
10. NAIL is a holding company for its media and other interests, and none of them
10. NAIL is a holding company for its media and other interests, and none of them
are relevant for purposes of this transaction.
11. Metlife is a life insurance company whose business activities are irrelevant for
purposes of the present transaction.
12. ABRFB was, prior to African Bank’s financial difficulties, involved in the market
for the provision of mortgage, asset based loans, personal loans and commercial
loans.
13. Afribrokers acts as an insurance broker to the ABRFB only. Its sole function is to
arrange cover in the area of credit life & homeowners’ insurance and to process
claims arising from this cover.
3 This was effected by way of an agreement entered into between BoE Holdings, Nail, Metlife, Tetha
Group Ltd, African Bank and Alternative Finance on 30 October 1998.
4 The parties advised us at the hearing that LMS was previously a Division of CUF but that it is at the
moment a separate company which has been created separately from CUF with separate shareholders
from the merging parties.
5 See Commission’s Recommendations (page 3) as well as pages 3637 of the record.
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The relevant market
14. In its investigation, the Commission found that no overlap exists in respect of
both parties in that BoE (through the Nedcor group) provides loan book
administration services internally while CUF can provide that to third parties as well. 6
It appears from the above that the relevant market may be broadly or narrowly
defined. According to the merging parties, the market can be broadly defined as the
market for the provision of loan book administration services in South Africa. The
parties further submitted that the relevant market can from a narrow perspective
be broken down into the constituent parts of loan book administration services with
each aspect of loan instalment collections, recovery of capital amounts of non
performing debts, and monthtomonth reporting of the above activities constituting a
separate narrow market.
15. We will not endeavour to determine which market is relevant as the proposed
transaction will not result in any substantial lessening or prevention of competition,
irrespective of the market being broadly or narrowly construed.
Geographic market
16. The merging parties stated that they render their respective services in South
Africa. As a result, we conclude that the relevant geographic market is therefore
national.
Impact on competition
17. The Commission found no overlaps with regard to the loan book administration
services. The market appears not be very dynamic in that the services rendered are
basic services. The merging parties contended that customers in this market could
also be able to undertake these services inhouse. The merging parties emphasised
that entities such as banks, law firms and debt collectors partake in various aspects
of loan book administration and can exert competitive pressure on the merging
parties. According to the merging parties, there are no regulatory barriers impeding
parties. According to the merging parties, there are no regulatory barriers impeding
new entry into this market.
Public interest
18. There are no significant public interest issues militating against the approval of
this transaction.
Conclusion
19. In light of the above, we agree with the Commission’s submission that this
transaction is unlikely to result in the substantial lessening or prevention of
competition. We accordingly approve this merger unconditionally.
6 Commission’s Recommendations (page 6, para. 4.2).
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____________ 18 August 2004
David Lewis Date
Concurring: Norman Manoim and Mbuyiseli Madlanga
For the merging parties: Justin Balkin (Edward Nathan & Friedland)
For the Commission: Kathija Ramathula ( Mergers & Acquisitions )
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