COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 69/LM/Sep04
In the large merger between:
Mvelaphanda Holdings (Pty) Limited
and
Rebserve Holdings Limited
Reasons for Decision
Approval
1. On 27 October 2004 the Competition Tribunal issued a Merger Clearance
Certificate approving unconditionally the merger between the abovementioned
merging parties. The reasons for our decision follow.
The merging parties
2. The primary acquiring firm is Mvelaphanda Holdings (Pty) Ltd (“Mvela
Holdings”), a South African incorporated private company. The majority of Mvela
Holdings’ issued shares are held by trusts whose beneficiaries are historically
disadvantaged persons (“HDP’s”). Mvela Holdings has direct and/or indirect control
over 22 subsidiaries. 1
3. The primary target firm is Rebserve Holdings Ltd (“Rebserve Holdings”), a
holding company of a group of services companies whose issued ordinary
shares are listed on the JSE. It controls 21 subsidiaries, and is not controlled
by any firm/s. 2
The Merger Transaction
4. The proposed transaction is a reverse takeover of Rebserve Holdings by Mvela
Holdings whereby the latter company will become the controlling shareholder of the
former.
5. Rebserve Holdings will acquire assets and shares from Mvela Holdings. The
purchase price will be discharged by Rebserve Holdings allotting and issuing
Rebserve Holdings’ shares to Mvela Holdings and assuming certain interest bearing
debt of Mvela Holdings; and a subsidiary of Rebserve Holdings transferring certain
Rebserve Holdings’ shares which are held as treasury stock to Mvela Holdings.
1 See the Record (Pages 78).
2 Ibid pages 910.
6. Pursuant to such allotment, issue and transfer of Rebserve Holdings’ shares,
Mvela Holdings will hold not less than 50.1% (50% plus 1 share) of the issued share
capital of Rebserve Holdings.
7. The parties pointed out that after the implementation of the proposed transaction –
Rebserve will be the owner of the assets it bought from Mvela Holdings 3;
Mvela Holdings will be the controlling shareholder of Rebserve Holdings; and
The merged entity will be a major black owned, controlled and managed
diversified industrial group.
Rationale for the transaction
8. Rebserve Holdings sees this deal as an opportunity to provide Rebserve Holdings
with valuable BEE credentials which is an essential criteria to have particularly in the
industry in which they currently compete. 4
The activities of the merging parties
9. Mvela Holdings is an investment holding company which presently holds
investments in a range of companies covering mining and resources , facilities
management, financial services , property, healthcare, information technology ,
telecommunications and general industrial sectors .
10. Rebserve Holdings operates businesses and owns subsidiaries that provide a
range of services in a number of sectors, namely:
Facilities management and professional services;
Mining and technical services;
Food services (which include contract catering services, distribution of food
packaging and related products, and franchising); and
Support services (which comprises security, cleaning and freight forwarding
services).
Competition evaluation
Horizontal analysis
11. After comparing the activities of the merging parties, the Commission found that
the only area in which the parties might compete is in the provision of property
management services. In the merging parties’ view, a distinction needs to be drawn
between property management services (“PMS”) and facilities management services
(“FMS”). The distinction is fully set out below.
Property management services (“PMS”)
12. Property management services are offered both to customers who intend to
outsource the management of their entire immovable property and to customers, who
3 Ibid pages 3941.
4 See the Commission’s Recommendations (Page 3, paragraph 3).
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require a specific type of service with regard to their immovable property. The
services generally provided as PMS can be split into two categories:
• Infrastructure property management services: comprising security, gardening,
janitorial services, hygiene and pest control, waste management, ground
maintenance and general cleaning services.
• Commercial and retail property management services: which includes
brokering and management of the leasing of premises, collecting rentals,
paying rates and utilities bills and accounting and other administrative
services, and the management of shopping centres.
Facilities management services (“FMS”)
13. Facilities management services comprises the provision of technical maintenance
and other technical services, including maintenance, modification and modernisation
of technical systems and facilities such as power supply, lighting, heating, air
conditioning, energy management and telecommunications systems and facilities (for
e.g., telephone exchanges and telecommunications masts).
Relevant market: Product overlap
14. The Commission’s view is that the PMS and FMS fall within distinct markets in
that the services are unique and not substitutable with each other. Because of
Rebserve Holdings’ minor involvement in this activity we consider it unnecessary for
us to make a finding as to the relevant market. Both the Commission and the parties
pointed out that none of the acquiring firms provide FMS hence no overlap exists with
respect thereto.
15. It appears that both Mvela Holdings and Rebserve Holdings – through their
respective subsidiaries – provide property management services. The Commission
contended that property management services is provided on a national basis whilst
customers can reasonably turn to firms which are located in any parts of the country
customers can reasonably turn to firms which are located in any parts of the country
for these services. As a result, the Commission concluded that the relevant
geographic market for PMS is national.
16. Following is a brief outline of the activities of the firms belonging to the merging
parties which provide similar services.
17. Mvelaphanda Holdings on the one hand appears to have interests in the following
two firms.
Broll Property Group (Pty) Ltd (“Broll Group”)
Mvelaphanda Holdings’ wholly owned subsidiary, Mvelaphanda Private Equity (Pty)
Ltd (“Mvela PE”) has an indirect interest in Broll Group through Mvelaphanda
Investment Trust (“the Trust”). 5 The Broll Group provides a full range of commercial
PMS including commercial, industrial and shopping centre management, corporate
real estate services, financial process and credit management, project and “targeted
5 The Trust has a 50% shareholding in Broll Group, but such shareholding is subject to a downward
adjustment.
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enduser brokering” 6, and “tailored” or “integrated” PMS. According to the parties, the
Broll Group currently manages approximately 15% of the total property management
market.7
Safety Security and Justice Holdings (Pty) Ltd (“SSJ”)
SSJ is primarily a property investment company in that it acquires and invests in
immovable properties. Its core business entails the acquisition of immovable
properties from the Department of Public Works (for e.g., magistrate’s court buildings
and prisons) on an arms length basis – and then leases the properties back to the
Department on the basis that SSJ will provide certain services including property
management services.
18. On the other hand, Rebserve Holdings has interest in Total Facilities
Management Company (Pty) Ltd (“TFMC”) and Experience Delivery Company (Pty)
Ltd (“EDC”). The TFMC seems to be the only firm in Rebserve Holdings which
provides property management services. TFMC also provides facilities management
services to its sole client, Telkom SA Ltd. According to the parties, 90% of the work
done by TFMC relates to facilities management services with the remaining 10% on
property management services.
Will this impact negatively or otherwise on competition?
19. In light of the above, the Commission found that Rebserve provided a limited
property management service with Telkom currently its only client. The parties further
contended that TFMC is not an effective competitor in the market for the provision of
property management services. According to the Commission, these services are
provided as ancillary services to its primary service which is facilities management
services.
20. There seem to exist a number of major players in the market for the property
management services, viz., Investec Properties, Colliers, Marriott, JHI and Gensec.
management services, viz., Investec Properties, Colliers, Marriott, JHI and Gensec.
The Commission contended that the merging parties do not compete with each other
directly. According to the Commission, the parties’ activities are to a certain extent
“complementary” and will (postmerger) be able to supply a greater spread of
services to its respective clients.
21. We are satisfied that there are no significant vertical issues arising from this
transaction, which may impact negatively in the markets in which the merging parties
currently compete.
Public Interest Concerns
22. No public interest issues militate against the approval of this transaction. The
parties pointed out that the merger would not result in any job losses.
Conclusion
6 That is, finding tenants or buyers for buildings.
7 See the Commission’s Recommendations (Page 5).
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23. 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.
___________ 05 November 2004
David Lewis Date
Concurring: Norman Manoim and Medi Mokuena
For the merging parties: Desmond Rudman (Werksmans Attorneys)
For the Commission: Maarten van Hooven & George Thapedi
(Mergers & Acquisitions )
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