COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 10/LM/Mar05
In the large merger between:
Clidet 526 (Pty) Ltd Primary Acquiring Firm
and
Pamodzi Investment Holdings (Pty) Ltd Primary Target Firm
REASONS FOR DECISION
Approval
[1] The Competition Tribunal issued a Merger Clearance Certificate on 23 March
2005 approving the proposed merger between the abovementioned parties in terms
of section 16(2)(a). The reasons for the approval of the merger appear below.
The Parties
[2] The primary acquiring firm is Clidet No. 526 (Pty) Ltd (“Clidet”), a special purpose
vehicle whose shareholders are RMB Ventures (Pty) Ltd (“RMB Ventures”) 1 and
certain executives (“the executives”) of Pamodzi Investment Holdings (Pty) Ltd
(“PIH”). RMB Ventures and the executives hold 40% and 60% of Clidet respectively. 2
[3] The primary target firm is PIH, an investment holding company focussing on
telecommunications, information technology, financial services, food and related
industries.3 PIH controls Alacrity Financial Services Ltd (“Alacrity”) and FoodCorp
Holdings (Pty) Ltd (“Foodcorp Holdings”). 4
The transaction
1 RMB Ventures is 85% held by RMB Private Equity (Pty) Ltd (RMB Private Equity”) and as to 15%
by FirstRand Ltd’s employees. 94% of the shares in RMB Private Equity are held by FirstRand Bank
Holdings Ltd, which is 100% owned by FistRand Ltd. The merging parties submitted that from the
FirstRand stable only the activities of FirstLink Insurance Brokers (Pty) Ltd (“FirstLink”) was relevant
for competition analysis.
2 The executives are Sifiso A. Msibi (“Msibi”); Ndaba A. Ntsele (“Ntsele”); and Jacobus J. du Plooy
(“du Plooy”) who own 20% each in Clidet. See pages 3132 of the record.
3 Certain PIH Executives and historically disadvantaged individuals own 75.80% shares of PIH.
15.68% is owned by the Pambi Trust; 4.80% is held by the PIH Share Trust and 3.80% by the Pamodzi
Trust. See page 38 of the record.
4 Pamodzi Ukuvikela Investments Ltd (“PUI”), a wholly owned subsidiary of PIH, holds 50% of the
issued share capital of Alacrity. Foodcorp Holdings holds 100% of the shares in Foodcorp (Pty) Ltd
(“Foodcorp”). See page 26 of the record as well as page 3 of the Commission report.
[4] The proposed transaction entails the acquisition of PIH by RMB Ventures and
certain executives of PIH (through Clidet, a special purpose vehicle). The investment
acquired in PIH consists of the shares and claims in PIH and one ordinary share in
the share capital of Shady Grove Investments (Pty) Ltd (“Shady Grove”), a vehicle
through which the Pambi Trust holds its shares in PIH. 5 Postmerger, Clidet and
Pambi Trust will own 31% and 8% respectively in PIH whilst 69% would remain in the
hands of a vast array of individuals. 6
[5] The merging parties consider this deal as a greater opportunity for black
economic empowerment, because the beneficiaries of the Pambi Trust, who are a
broad based historically disadvantaged persons (“HDP’s”) (group of 57 individuals),
would remain with fully paid shares in PIH, thus consolidating the control of HDP’s in
PIH.7
Activities of the parties
[6] Clidet has been created mainly for this acquisition. Alacrity is involved in the
brokerage of shortterm insurance products. FirstLink is an insurance company
which specialises in the brokerage of shortterm insurance products. PIH is an
investment holding company with interests in a variety of sectors. Foodcorp is active
in the production, marketing and distribution of foods.
Competition Evaluation
[7] The merger does not give rise to any competition concerns. The relevant
companies for our analysis are Alacrity and FirstLink. Alacrity and FirstLink are
involved in the brokerage of shortterm insurance products throughout South Africa.
The market share figures provided to us by the merging parties revealed that Alacrity
and FirstLink enjoy less than 3% and 5% respectively in the shortterm insurance
brokering market. Postmerger, they will enjoy market shares not in excess of 8%, a
brokering market. Postmerger, they will enjoy market shares not in excess of 8%, a
relatively small share. There appear to be a number of major competitors with
substantial market shares in the relevant market such as Alexander Forbes (22%),
Glenrand MIB (14%), ABSA Brokers (6%) and Standard Bank Insurance Brokers
(8%). The merger appears not to raise any vertical integrated concerns whatsoever.
[8] The transaction did not raise any public interest concerns. In addition, no job
losses were anticipated postmerger.
Conclusion
[9] In the Tribunal’s view, the transaction will not prevent or lessen competition
substantially.
5 For a detailed exposition of the steps involved in this acquisition, refer to page 42 of the record and
page 4 of the Commission’s report.
6 In his testimony to the Tribunal, Mr Msibi pointed out that there would not be a controlling
shareholder postmerger, but the shareholders’ agreement requires 75% of shareholders to agree on
acquisitions and/or disposals. He further testified that RMB would control PIH as long as the
preference shares remain in place. See Mr Msibi’s testimony, pages 24 of the transcript of 23 March
2005. See also, page 432 of the record.
7 The merging parties pointed out that the shares to be held by the Pambi Trust would, postmerger, be
unencumbered as opposed to the pretransaction status where the Pambi Trust stands to lose its shares
as it cannot meet its obligations to Advisory Services Ltd (“AMB”).
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_____________ 31 May 2005
Yasmin Carrim Date
Concurring: David Lewis and Norman Manoim
For the merging parties: Adv. Horace Shozi instructed by Mahlangu Nkomo
Mabandla Ratshimbilani Attorneys.
For the Commission: Hardin Ratshisusu (Mergers & Acquisitions Division)
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