COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 65/FN/Jul05
In the matter between:
Johnnic Holdings Limited Applicant
and
Hosken Consolidated Investments Limited First Respondent
Competition Commission Second Respondent
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Decision
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Tribunal's order
1. The Tribunal issued an order on 23 September 2005 dismissing this
application with costs.
2. This decision sets out the reasons for the order.
Introduction
3. On 21 July 2005 Johnnic Holdings Ltd (“Johnnic”) filed an application
with the Tribunal for a declaratory order and an interdict relating to
action which Johnnic perceived was being or would be taken by
Hosken Consolidated Investments Ltd ("HCI") in alleged
implementation of a large merger which had not received the approval
of the competition authorities. The merger in question is between HCI
(acting through a wholly owned subsidiary, Mercanto Investments (Pty)
Ltd ("Mercanto")) as the acquiring party, and Johnnic as the target
company.
4. HCI, the first respondent in the application, opposed the application.
The second respondent, the Competition Commission ("the
Commission") did not oppose the application or file evidence.
5. The matter was heard on 22 September 2005.
HCI's undertaking, and the relief ultimately sought
6. A considerable terrain was in dispute at the time when HCI had filed its
answering evidence (on 8 August 2005) and Johnnic responded with
replying evidence, filed on 23 August 2005 This terrain was however
considerably diminished when HCI's attorneys gave Johnnic an
undertaking on HCI's behalf on 7 September 2005 to the effect that
HCI would refrain from carrying out certain actions which Johnnic had
decried as unlawful. At the hearing, Johnnic's counsel undertook to
reframe the relief originally sought in order to take this undertaking into
account, and the revised version was duly provided.
7. In the revised version, what Johnnic seeks is an order for:
A declaration in these terms:
The purchase by the first respondent of any shares in the applicant, and/or
the exercise by the first respondent of any voting and/or other rights
attaching to such shares as it may have acquired in the applicant, prior to the
approval of the first respondent’s merger, alternatively proposed merger, with
approval of the first respondent’s merger, alternatively proposed merger, with
the applicant constitutes implementation, alternatively further implementation,
of such merger, alternatively proposed merger, without approval in
contravention of the provisions of the Competition Act (No. 89 of 1998)(the
“Act”);
and an interdict in these terms:
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Pending the final approval, if any, of the merger, alternatively
proposed merger (with or without conditions), between the first
respondent and the applicant, by the Competition Tribunal or
the Competition Appeal Court, as the case may be, in terms of
the Act, the first respondent shall be and is hereby interdicted
and restrained from implementing, alternatively further
implementing, the merger, alternatively proposed merger,
including, without limitation, by exercising the voting and/or
other rights attaching to such shares as it may have acquired in
the applicant.
Fundamental questions in the application
8. The remaining questions in dispute include some which traverse thorny
ground, but on the view we have taken of the application what requires
resolution comes down to two fundamental points:
1) Does HCI control Johnnic in the sense in which control is envisaged
in s. 12(2)(g) of the Competition Act, 1989, as amended ("the Act")?
2) Does HCI's intended merger with Johnnic amount to a ‘proposed’ merger which,
on the basis of the decisions of the Competition Appeal Court ("the CAC") in the
cases referred to below as the Gold Fields/Harmony cases, disentitles HCI from
exercising voting rights in its current holding of Johnnic shares before the merger
has received the approval of the competition authorities?
9. The relevance of these questions will be apparent once we have set
out some of the essential facts.
Factual background
10. The dispute originates from the desire of both HCI and Johnnic to
become significant owners of assets in the gaming industry, and the
consequent strategy which both HCI and Johnnic adopted of targeting
for acquisition the shares of a holding company in this sector, Tsogo
Investment Holdings ("TIH"). TIH is the majority shareholder of a
substantial casino and hotel operator, Tsogo Sun Holdings Ltd ("TSH"),
substantial casino and hotel operator, Tsogo Sun Holdings Ltd ("TSH"),
said to be the largest in this field in South Africa.
11. Johnnic, originally a conglomerate, undertook the unbundling of
Johnnic Communications Ltd (“Johncom”) in March 2004. Johnnic’s
assets after the unbundling consisted of: 1
• A 100% interest in Gallagher Estate and Johnnic Properties;
1 Founding affidavit, paragraph 12, p. 1011 of the record.
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3
• An effective interest of 28.6% in Suncoast Casino; and
• And effective interest of 9.55% in TIH, with the acquisition of a
further effective 9.5% interest subject to regulatory approvals;
• (Apparently, according to HCI, but not mentioned by Johnnic in its list of
these assets in its founding affidavit) some R1.3 billion in cash. 2
12. Following the unbundling of Johncom, Johnnic set out to acquire
further gaming investments.
13. As illustrated in the accompanying diagram, which was supplied by
Johnnic as an annexure to one if its affidavits, Johnnic, during the latter
part of 2004, acquired 25% of the ordinary share capital of Fabcos
Investment Holding Company Ltd (”FIH"), a 38% shareholder in TIH.
This is described in the papers as "the first tranche". Johnnic also
purchased a further 25% shareholding in FIH, "the second tranche”,
which is subject to certain regulatory approvals.
14. HCI resisted Johnnic’s acquisition of the second tranche and has
entered into a transaction to acquire Fabvest Investment Holding Ltd
("Fabvest"), currently a 75% shareholder in FIH. This acquisition by
HCI is also subject to regulatory approval. Fabvest disputes Johnnic's
acquisition of the second tranche and this dispute is the subject of
arbitration between Johnnic and Fabvest.
15. HCI clearly sought ways to circumvent what appears to be a
tumultuous scramble for ownership of TIH and TSH which, on the
description given at the hearing by HCI's counsel, has generated a
swathe of litigation in various High Courts and before the gambling
regulatory boards of several provinces. Johnnic asserts that from the
outset HCI intended to acquire control of Johnnic. HCI denies this, if
outset HCI intended to acquire control of Johnnic. HCI denies this, if
somewhat obliquely, and asserts that this intention was formed only
later, at a point we shall identify.
16. The first step taken by HCI to get around its headtohead contestation
with Johnnic was the acquisition by HCI during March 2005 of 20.72%
of the issued shares in Johnnic. Soon after, HCI took the next step,
being the acquisition of a further 9%, bringing its total shareholding in
Johnnic to approximately 30%.
17. During May 2005, and on strength of its 30% interest, HCI requisitioned
a meeting of Johnnic shareholders in terms of section 181 of the
Companies Act, its purpose being to secure the appointment of three of
HCI's nominees as directors of Johnnic. This would have enlarged
Johnnic's board from six to nine members. At this meeting, which was
held on 30 June 2005, the majority shareholders voted against the
2 Answering affidavit, paragraph 67, p. 97 of the record.
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appointment of HCI’s nominees, thereby defeating HCI’s proposal.
18. On 1 July 2005, the day after the requisitioned shareholders' meeting,
HCI announced that it had acquired an additional holding of
approximately 10% in Johnnic, raising its total shareholding to 39.75%
– a holding to which we shall refer below, for convenience, as 40%.
Mercanto holds all of these shares.
19. The web of holdings in this corporate matrix is illustrated in the
accompanying diagram. Companies which have not been identified
above but which are named in the diagram have no part in the dispute
before the Tribunal between Johnnic and HCI.
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20. Before the requisitioned shareholders' meeting of 30 June 2005, HCI and its
corporate advisors had met with Johnnic’s institutional shareholders and presented a
plan to them in terms of which it was proposed that HCI’s three nominees be
appointed to Johnnic's board, and that Johnnic, with HCI's cooperation, set out to
become the vehicle through which the TSH group would be listed on the JSE. In
essence, TIH would sell all of its shares in TSH to Johnnic in return for shares in
Johnnic, and SABSA Holdings (Pty) Ltd, the minority shareholder in TSH, would sell
its holding to Johnnic in return for cash or shares in Johnnic. This course of action
was only to be pursued once HCI's nominees had been appointed to the Johnnic
board.
21. This plan fell apart when Johnnic’s other shareholders voted down
HCI’s resolution at the requisitioned meeting.
22. This rebuff led HCI to change course and to increase its stake in Johnnic to the extent
where it could contend for control. HCI asserts that it was only at this point that it
formed the intention of controlling Johnnic. 4 Its former strategy, if we understand it
correctly, had been to coexist with Johnnic, each holding substantial direct or indirect
4 Answering affidavit, paragraph 28, on p. 77 of the record.
HCI
Fabvest**Johnnic Holdings
Fabcos Inv .
Holding Co (FIH)
Tsogo Investment Holdings (TIH)
Tsogo Sun Holdings (TSH)
51%
38%
39.75%
Peregrine
Capital
5%
Old Mutual Coronation
16.54%14.94%
Flaghigh
Nactu
Tangney
100%
100%
100%
10.7%
10%
11.4%***
SABSA Holdings
49%
25%* 75% *
Mercanto
100%
PIC
4.17%
Tsogo Sun Gaming Southern Sun Hotels
100% 100%
Sanlam
3.87%
NafcocARH
4.6% 25%
Motsepe
0.3%
* In the event that the suspensive conditions to the second tranche are fulfilled, both Johnnic Holdings
and Fabvest will each hold a 50% interest in FIH.
** HCI has purchased 100% of the shares in Fabvest, subject, inter alia, to obtaining the approval of
the relevant Gaming Boards, which approval has yet been obtained.
*** Tangney’s shareholding in TIH is the subject of a dispute in the High Court of South Africa.
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stakes in TIH/TSH but preserving its own identity, with HCI retaining what was by 30
June 2005 a significant but not a controlling holding in Johnnic. 5
23. The attainment by HCI of its 40% shareholding in Johnnic, exceeding the 35% which
triggers a mandatory offer in terms of the Securities Regulation Code on Takeovers
and Mergers and the Rules of the Securities Regulation Panel ("the SRP Code”), led
HCI to announce on 4 July 2005 its firm intention to make such a mandatory offer for
the balance of the shares in Johnnic. HCI also announced that it would invoke s.
440K of the Companies Act, if it obtained acceptance of 90% of the shares bid for in
the mandatory offer, in order to take its holding to a full 100%. Thereafter, HCI
announced, it would cause Johnnic to be delisted. 6
24. In the light of this announcement Johnnic's attorneys sent a letter to
HCI on 5 July 2005 informing HCI that Johnnic regarded HCI's latest
acquisition of Johnnic shares and the mandatory offer as a "proposed
merger" in terms of the Competition Act. In the letter, Johnnic put HCI
on terms to notify the competition authorities of the "proposed merger",
and pending their approval to refrain from:
• implementing the "proposed merger";
• taking transfer of any of the latest 10% of Johnnic shares
acquired by HCI;
• acquiring and taking transfer of further Johnnic shares other
than in terms of the mandatory offer; and
• voting or otherwise exercising any rights attaching to the shares constituting
the latest 10% acquisition or attaching to any further Johnnic shares acquired
by HCI. 7
25. For convenience we set out here the relevant provisions of s. 13A of
the Act:
1) A party to …... a large merger must notify the Competition
Commission of that merger in the prescribed manner and form.
2) ……
3) The parties to …….[a] large merger may not implement that merger
2) ……
3) The parties to …….[a] large merger may not implement that merger
until it has been approved, with or without conditions, by ……. the
Competition Tribunal in terms of section 16(2) or the Competition
Appeal Court in terms of section 17.
26. HCI's attorneys responded on 6 July, largely refuting Johnnic's contentions but stating
that HCI considered that its mandatory offer might lead HCI to boost its shareholding
in Johnnic beyond 50%, which would in HCI's view constitutute a notifiable merger. In
anticipation of acceptance above this level, HCI had informed the Commission of
HCI's mandatory offer and the merger which would ensue if an appropriate level of
5 See paragraph 22 of the answering affidavit, p. 76 of the record.
6 The initial announcement forms Annexure KCR 2 to the founding affidavit, at p. 3031 of the record.
HCI's circular to Johnnic's shareholders setting out the offer forms Annexure JC4, starting at p. 130 of
the record.
7 Annexure KCR 17 to the founding affidavit, at p. 6061 of the record.
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acceptance was achieved. However, HCI denied that it had control of Johnnic at that
stage, and asserted that it had not entered into any voting pool or other arrangement
with others which would amount to control. Accordingly HCI denied that it was obliged
to comply with Johnnic's demands and declined to submit to them. 8
27. A letter from HCI's attorneys to the Commission was indeed sent on 6 July 2005
informing it of HCI's shareholding in Johnnic and of HCI's intention to make a
mandatory offer for the remaining shares, on the basis that acceptance in respect of
another 10% of the shares would lead to a notifiable merger. 9
28. An offer document was circulated by HCI to Johnnic's shareholders on 1 August 2005
in compliance with the requirements of the SRP Code, and on 3 August 2005
Mercanto filed a statutory notification of a merger with the Commission in terms of
section 13A(1) of the Competition Act. It appears that Johnnic has also filed a merger
notification document in its capacity as a target company in a merger. 10
29. It is common cause that the merger contemplated in the notifications is
a large merger.
Some features of the parties' evidence
30. According to Johnnic's main deponent, Ms Ramon, HCI had a " calculated, deliberate
and ongoing strategy to implement an actual, or at least proposed merger with
Johnnic through a series of interrelated steps, without the approval of the
competition authorities ". She asserts that the acquisition by HCI of the 10%
shareholding on 1 July 2005, taking HCI's holding to 40%, was " merely the final step
of a strategy to acquire control of Johnnic which commenced with its acquisition of an
approximately 20.72% interest … in March 2005 ."11
31. Ms Ramon states that HCI is the largest single shareholder in Johnnic, with twice as
31. Ms Ramon states that HCI is the largest single shareholder in Johnnic, with twice as
many shares as the next largest shareholder. She identifies the other material
shareholders in Johnnic and their approximate percentage interests as follows: 12
Coronation 16.54
Old Mutual 14.94
Public Investment Commission ("PIC") 4.17
Sanlam 3.87
African Harvest ("AHFM") 4.7
32. It emerged from a supplementary affidavit by Ms Ramon, dated 21 September 2005,
that Sanlam has in the interim sold its holding and that another institutional investor,
8 Annexure KCR 18 to the founding affidavit, pp 6264 of the record.
9 Annexure KCR 3 to the founding affidavit, pp 3233 of the record.
10 See transcript p. 18 and for Mercanto’s notification p.261 of the record.
11 Paragraph 36 of the founding affidavit and on p. 17 of the record.
12 Founding affidavit, paragraph 37 on p. 17 of the record.
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Peregrine, has acquired a holding of 5%. 13 This most recent information is reflected
in the array of shareholders identified in the accompanying diagram.
33. In her founding affidavit Ms Ramon stated, in language which we find highly
equivocal, that she had been advised that HCI's current shareholding of 40% in
Johnnic " may itself constitute an acquisition of control, and hence the implementation
of an actual merger, within the meaning of s. 12 of the Act, and in particular the ability
to materially influence the policy of Johnnic within the meaning of section 12(2)(g). "14
34. For convenience, the terms of s. 12(2), as it relates to companies, are
stated at this point:
12(2) A person controls a firm if that person –
a) beneficially owns more than one half of the issued share
capital of the firm;
b) is entitled to vote a majority of the votes that may be cast at a
general meeting of the firm, or has the ability to control the
voting of a majority of those votes, either directly or through a
controlled entity of that person;
c) is able to appoint or veto the appointment of a majority of the
directors of the firm;
d) is a holding company, and the firm is a subsidiary of that
company as contemplated in section 1(3)(a) of the
Companies Act, 1973 (Act No. 61 of 1973);
e) …….
f) …….
g) has the ability to materially influence the policy of the firm in
a manner comparable to a person who, in ordinary
commercial practice, can exercise an element of control
referred to in paragraphs (a) to (f).
35. It seems from various parts of the founding affidavit, but specially paragraph 37, that
Johnnic regards the mere acquisition of its shares by HCI, with the ultimate goal of
securing control, as the implementation of a merger in contravention of the Act.
Although this too is stated only obliquely in the affidavit, it seems that this alleged
implementation is considered to extend collectively to all the transactions by which
parcels of shares leading up to the current holding of 40% were obtained, and also to
certain and later attempts of HCI to acquire additional shares, manifested by
approaches to some of the institutional shareholders. 15 Ms Ramon mentions in
particular the PIC and AHFM.
36. Ms Ramon also set out in her founding affidavit the extent of shareholder participation
13 Paragraph 11 of supplementary affidavit of Ms Ramon dated 21 September 2005.
14 Founding affidavit, paragraph 37 on p. 17 of the record.
15 See paragraphs 1932 of the founding affidavit, p. 1215 of the record.
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in the voting at a number of the most recent general meetings of Johnnic, identified in
the table below. 16
Date of
meeting
% of issued share capital
represented
Purpose of meeting
3/6/2003 76.28%
General meeting to consider unbundling of
Johnnic assets
30/9/2004 64.36% Annual general meeting
27/10/2004 83.85% Annual general meeting
9/3/2005 80.35% General meeting to consider unbundling of
Johnnic assets
30/6/2005 90.42% General meeting requisitioned by HCI to
appoint directors to Johnnic Board
37. Ms Ramon stated that the average percentage of issued share capital represented at
Johnnic’s general meetings since 2003, derived from this table, had been 79.05%.
Only at the most recent meeting, in June 2005, at which there had been an unusually
high turnout, would HCI not have commanded a majority of votes cast, she
asserted.16A These facts, she claimed, demonstrated that HCI, with its 40%
shareholding, was in control of Johnnic.
38. Ms Ramon's assertions equate to a claim that HCI's holding of 40%
gives it the "material influence" referred to in s. 12(2)(g). This allegation
is the major plank in the first part of Johnnic's case, as will be seen.
39. Ms Ramon deals in her founding affidavit with her perception of harm suffered as a
result of the allegedly illegal conduct of HCI. Her allegations are couched in entirely
general terms. 17 She states that since the Competition Act is intended to protect the
public interest, a party to a merger who seeks to implement a proposed merger
without notification and without the prior approval of the competition authorities does
injury to the public interest. She asserts further that HCI is a competitor of Johnnic in
the hotel and gaming market, in particular in respect of TSH. If HCI is permitted to
implement the merger it will be able to control Johnnic (if it does not already do so)
implement the merger it will be able to control Johnnic (if it does not already do so)
and will be able to "neutralise" the competition of Johnnic for TSH. Accordingly, she
states, there is a reasonable apprehension that HCI, if not restrained by the Tribunal,
will continue to implement its proposed merger with Johnnic without approval and in
contravention of the Act. This would be tantamount to harm to the public interest and
16 Paragraph 39 on p.18 of the record.
16A We find this a puzzling assertion in view of the fact that, on the figures she adduced, shareholder
representation at the three most recent general meetings of Johnnic exceeded 80%.
17 Set out in paragraphs 6063 of her affidavit, p. 2324 of the record.
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to competition, and "serious and/or irreparable" harm to Johnnic.
40. It is only in Ms Ramon's replying affidavit, filed on 23 August 2005, that a more
specific vision of harm emerges. She states 18 that a general meeting of Johnnic's
shareholders will be held on or about 27 September 2005 at which HCI will be able to
vote its shares in Johnnic a meeting at which " a number of resolutions of significant
strategic and operational importance " for Johnnic will be considered, including:
• the adoption of the group's financial statements for the year to
31 March 2005;
• the reelection of certain directors;
• a special resolution authorising the directors to repurchase
Johnnic shares;
• the approval and adoption of "the Johnnic Holdings Limited Long
Term Incentive Plan 2005";
• approval of the nonexecutive directors' remuneration.
41. Although Ms Ramon refers to other possible meetings of shareholders
of Johnnic, she does not describe any as having been convened or
being in immediate prospect. The further meetings she describes
appear to be the shareholders' meetings one would expect a company
such as Johnnic may be required to hold in special circumstances,
such as to vote on Category 1 transactions under the rules of the JSE
and meetings in terms of rule 19 of the SRP Code. Nothing is said by
Ms Ramon to suggest that any such special circumstances are
impinging on Johnnic.
42. Much of the evidence in the parties' affidavits is otiose in view of the undertaking of
HCI, referred to above. 19 This was an undertaking, provided after Johnnic had filed
its replying affidavit, to refrain from acquiring further shares in Johnnic outside the
mandatory offer, pending approval of the merger by the competition authorities. It
followed an equivocal response by Johnnic in its replying evidence to a statement by
followed an equivocal response by Johnnic in its replying evidence to a statement by
HCI in its answering affidavit that HCI did not intend to buy further Johnnic shares
outside the mandatory offer to Johnnic's shareholders.
43. However, some of the contents of the answering affidavit by HCI's
deponent, Mr Copelyn, should be mentioned.
44. Mr Copelyn asserts that HCI's acquisitions of shares in Johnnic formed part of its
overall strategy " to increase its exposure to gaming assets and to TIH and [TSH] ".20
Although his evidence on the point is somewhat circuitous, he appears to seek to
18 Paragraph 16, at p. 2734 of the record.
19 The undertaking is set out in a letter from HCI's attorneys to Johnnic's attorneys, dated 7 September,
forming Annexure JC 8 to HCI's supplementary affidavit by Mr Copelyn. It is at p. 328329 of the
record.
20 Answering affidavit, paragraph 14, at p. 73 of the record.
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present the picture that it only occurred to HCI to seek control of Johnnic after his
company had been rebuffed in its attempt at the meeting of 30 June 2005 to place
three nominees on the board of Johnnic. We find this farfetched. It is far more
probable that a bid for control of Johnnic was foreseen from the start as a fallback
plan if the cake of TIH and TSH could not be amicably cut with Johnnic.
45. As regards the declaratory order sought, Mr Copelyn regards it as academic in view
of HCI's stated intention, set out in his affidavit, not to acquire further shares in
Johnnic outside of the mandatory offer. 21 He states further that HCI has no intention
of implementing the merger until it has been approved by the competition
authorities.22
46. The interdict sought by Johnnic should not be granted, he contends, because Johnnic
has failed to establish the requirements for an interdict. 23 He goes on to discuss
what he considers to be Johnnic's failure to reveal a clear right, an injury committed
or a wellfounded apprehension of an injury, and the absence of an alternative
remedy. These are essentially legal submissions and they will be dealt with below
when the arguments of counsel at the hearing are discussed.
47. On the crucial question of whether HCI now controls Johnnic, Mr Copelyn denies the
existence of such control and the possession of "material influence" 24, and points
out the equivocal nature of Johnnic's assertions 25 – that HCI's 40% holding " may"
constitute control (paragraph 37 of the founding affidavit), and the allegation that "HCI
has already acquired control over Johnnic" (paragraph 41). He further contends that
HCI has always sought to comply with the Competition Act, and made its merger
notification once the mandatory offer had been triggered, not as a matter of legal
obligation at that stage but in anticipation of the acquisition of control. 26
obligation at that stage but in anticipation of the acquisition of control. 26
48. In his denial that HCI has de facto control of Johnnic, he points out that HCI has no
representation on Johnnic's board, and asserts that HCI has no arrangement by way
of a voting pool or otherwise by which it could exert control or influence the voting of
Johnnic shares other than those currently held by it. 27
49. He reveals however that HCI had in the preceding few days obtained irrevocable
undertakings from shareholders holding 3.1% of Johnnic's issued share capital to
accept the mandatory offer, subject to all requisite regulatory approvals. 28
21 Answering affidavit, paragraph 40, p. 83 of the record.
22 Answering affidavit, paragraph 52.3.3, p. 91 of the record.
23 Answering affidavit, paragraphs 45 et seq, from p. 85 of the record.
24 Paragraphs 6.3.1 at p. 71 of the record and paragraph 81.1 at p. 105.
25 Paragraph 52.2.3 at p. 89 of the record.
26 Paragraph 31.6, at p. 79 of the record.
27 Paragraph 31.7, at p. 80 of the record.
28 Paragraph 78.6, at p. 104 of the record.
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50. He contends that Ms Ramon's reliance on the voting figures at recent meetings of
Johnnic's shareholders is misplaced since Johnnic is " an entirely different company "
after the unbundling of Johncom in March 2004, and will in all likelihood be exposed
to greater scrutiny and shareholder participation than in the past, particularly as
significant press coverage of the current situation between Johnnic and HCI has led
to heightened shareholder interest in Johnnic's affairs. 29
51. He asserts that there are at present relatively few significant shareholders in Johnnic
and they are mainly very sophisticated and experienced institutional investors. 30 In
the light of these factors a high turnout of shareholders at general meetings can be
predicted.31 The other shareholders have already demonstrated their ability to vote
as a block, when HCI sought to have its three nominees placed on Johnnic's
board.32 Bearing in mind that at the most recent meeting the shareholder presence
had been 90.42% of Johnnic's share capital, he considers that HCI could only be said
to have gained control of Johnnic if it had half that number of shares plus one
share.33 This would place a controlling shareholding at more than 45%.
Submissions of counsel at the start of the hearing
52. Johnnic's counsel, Mr Unterhalter, conceded that, because of the undertaking given
by HCI to refrain from acquiring shares in Johnnic outside the mandatory offer, the
main practical interest in the case from Johnnic's viewpoint was whether HCI was
entitled to vote its existing shares in Johnnic at the general meeting of shareholders
to take place on 27 September 2005. In addition, Mr Unterhalter indicated that,
because of the hostile nature of the merger, the possibility that further meetings of
Johnnic's shareholders might be necessary before evaluation of the merger by the
Johnnic's shareholders might be necessary before evaluation of the merger by the
competition authorities had taken place was of substantial concern to Johnnic. 34
53. Mr Gauntlett, for HCI, pointed out that HCI had indicated in correspondence between
the parties' attorneys that it would be possible to postpone the meeting scheduled for
27 September, and confirmed HCI's willingness to cooperate in securing such a
postponement.35 This did not satisfy Johnnic.
Basis of claims for interdict
54. Mr Unterhalter contended that Johnnic was entitled to an interdict in
29 Paragraph 82, at p. 106 of the record.
30 Idem.
31 Idem.
32 Idem.
33 Idem.
34 See exchange of comments between the chairman and Mr Unterhalter at p. 45 of the transcript.
35 Transcript, p. 3.
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regard to the voting of HCI's shares in Johnnic on two alternative
grounds.
55. The first is that HCI has acquired control of Johnnic either solely by
virtue of its 40% shareholding or jointly with other shareholders who
have undertaken irrevocably to sell 3.1% of Johnnic's shares to HCI in
terms of the mandatory offer.
56. The second is that HCI is a party to a proposed merger with Johnnic
through its mandatory offer and the consequent s. 440K acquisition
referred to above. Under both alternatives Johnnic reasonably
apprehends, he asserted, that HCI would seek to implement the
merger without prior approval of the merger by the competition
authorities.
57. He referred to the definition of a merger under s. 12(1)(a) of the Act,
which states:
For purposes of this Act, a merger occurs when one or more
firms directly or indirectly acquire or establish direct or indirect
control over the whole or part of the business of another firm.
The issues of control and implementation as argued by Johnnic
58. Mr Unterhalter contended that the mere ownership by HCI of 40% of Johnnic, given
the "widely fragmented" spread of shareholders in Johnnic, conferred on HCI the
ability to materially influence the policy of Johnnic within the meaning of s. 12(2)(g) of
the Act. He said that one of the ways in which material influence could be tested was
to analyse the de facto ability of a minority shareholder to determine the outcome of
shareholder meetings, and cited the EC Notice on the Concept of a Concentration: 36
….. the shareholder is highly likely to achieve a majority at the
shareholders' meeting, given that the remaining shares are
widely dispersed. In such a situation it is unlikely that all the
smaller shareholders will be present or represented at the
shareholders' meeting.
shareholders' meeting.
59. It could not be inferred, he contended, that because HCI's attempt to install its three
nominees as directors of Johnnic had elicited an " abnormal and exceptional " turnout
of shareholders, all future decisions of major importance to Johnnic would generate
the same extraordinary degree of attendance.
60. On the issue of joint control, he argued that HCI now had an additional 3.1% of voting
power because of the irrevocable undertaking received by HCI from other
shareholders to sell these shares to HCI under the mandatory offer. This amounted to
36 OJ [1998] C66.
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joint control since " it goes without saying that shareholders willing to sign irrevocable
undertakings of this sort are likely to vote together with HCI on matters of significant
strategic and operational importance for Johnnic ."
61. In a review of the law in other jurisdictions, Mr Unterhalter mentioned the UK case of
Government of Kuwait v BP PCL, where the following was said: 37
… a shareholding of 21.6 would, in the absence of any other
large shareholdings, have been sufficient to allow the
Government of Kuwait to ensure that the Board of BP and its
senior management would have regard to the interest and
wishes of Kuwait before finalising any major decisions… Its
holding would have put it in a very strong position to tip the
balance if differences arose between shareholders.
62. Hence, he submitted, HCI already controlled Johnnic. Voting by HCI at
the forthcoming shareholders' meeting of Johnnic would amount to
implementation of HCI's merger with Johnnic and would be unlawful.
The "proposed merger" and the implications of this concept
63. The second ground argued by Mr Unterhalter, referred to above, is that
HCI has launched a "proposed merger" with Johnnic and is intent on
implementing the proposed merger without the approval of the
competition authorities, implementation taking the form of voting its
Johnnic shares.
64. The statutory basis for the term "proposed merger" is located in s.
11(5) of the Act, which defines three types of merger, and in subsection
(c) states that:
"a large merger" means a merger or proposed merger with a
value at or above the higher threshold established in terms of
subsection (1)(a).
65. There are corresponding definitions in s. 11(5)(a) and (b) of small and
intermediate mergers. The term "proposed merger" also appears in
sections 12A2(g) and 14(1)(a) of the Act.
sections 12A2(g) and 14(1)(a) of the Act.
66. The mandatory offer, Mr Unterhalter contended, represented the final stage of a
calculated, deliberate and ongoing strategy to acquire control through a series of
interrelated, incremental steps. The first of these steps, he said, had been taken in
March 2005 when HCI acquired its first parcel of shares in Johnnic. Mr Unterhalter
argued that this course of action placed HCI squarely within the boundaries of the
decision in Gold Fields Ltd v Harmony Gold Mining Company Ltd and another [2005]
1 CPLR 74 (CAC) and its consequent decision, Harmony Gold Mining Company
37 CM 447 (1998) at paragraph 8.16
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Limited v Gold Fields Ltd and others [2005] 1 CPLR 97 (CAC). We shall refer to them
collectively as "the Gold Fields/Harmony cases".
67. In those cases an interdict was granted to Gold Fields to restrain
Harmony, pending approval by the competition authorities, from voting
or otherwise excercising its voting rights in shares it held in Gold Fields
at a time when Harmony had launched a bid for control of Gold Fields.
More details of the essential facts in those cases will emerge later in
this decision.
68. Mr Unterhalter's strenuously argued interpretation of the Gold Fields/Harmony cases
was that a firm's mere intention to merge, arising at the time when the intention to
bring about the merger first takes hold in its corporate mind, becomes at and from
that moment a notifiable merger in terms of the Act, and that the exercise of voting
rights in shares in the target which the acquiring firm then holds or later acquires is
prohibited, being a form of implementation of the merger, until the merger has been
approved by the competition authorities.
69. We observe in passing that such a proposed merger would be, on Mr
Unterhalter's reasoning, on the same footing for purposes of
notification to and approval by the competition authorities, as, for
example, a friendly merger ensconced in a written, binding agreement,
supported and endorsed if necessary by the boards and shareholders
of either or both of the merging parties, and containing a suspensive
clause of a customary type making the merger subject to the
competition authorities' approval. But it would also extend to numerous
earlier milestones in a negotiation leading up the conclusion of a
contract, including discrete points at which draft documents for the
merger were drawn up and later revised or replaced. At each such
merger were drawn up and later revised or replaced. At each such
milestone, on Mr Unterhalter's contention, a notification must be filed.
When it is superseded by say the next draft agreement, representing a
counteroffer in the negotiation, the notification must be withdrawn and
a fresh notification filed. We shall return later in this decision to this
view of the notification requirements of the Act and its implications.
70. Mr Unterhalter argued that " at least from " 1 July 2005, when HCI acquired the 10%
stake in Johnnic which raised its holding from 30% to 40%, there was a clear
intention to take control of Johnnic, and consequently a proposed merger. From then
onwards, he contended, HCI was barred under s. 13A(3) from voting its shares in
Johnnic or taking any other step in implementation of the merger, and further was
obliged under s. 13A(1) to notify the proposed merger to the Commission. He
accepted that HCI had fulfilled the latter obligation, even if " belatedly and somewhat
reluctantly". Having filed the notification, HCI was still disentitled to vote its shares in
Johnnic. All the shares HCI had acquired, and not only the last parcel of 10%, were
affected by this disability.
71. Tracing what he considered a close parallel with the facts in the Gold Fields/Harmony
cases, he drew attention to a passage in the first of these cases on which he placed
strong reliance: 38
38 At p. 92FG
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… the early settlement, if implemented, would constitute a large
merger that must be notified in terms of [s.] 13A(1). For this
reason the acquisition by the first respondent [Harmony] of
34.9% of the issued share capital of appellant, read with the
irrevocable undertaking of Norilsk, would constitute an
assumption of control in terms of section 12(2)(g) of the Act.
72. This finding of the CAC was significant, Mr Unterhalter argued, in that it
did not postulate the success of the early settlement offer (a voluntary
offer for only sufficient shares to bring Harmony's stake in Gold Fields
to 34.9%). There was no certainty that the early settlement offer would
succeed, and yet the effect of the CAC's ruling was that if the best
outcome of such an offer would be the attainment of a controlling
shareholding, that represented a proposed merger. The test was how
many shares the offeror intended to acquire by its offer.
73. Even the facts revealed in the later of the Gold Fields/Harmony cases, in which
Harmony sought leave to appeal and also sought an amendment of the terms of the
interdict, had not dissuaded the CAC from upholding the interdict, if only in a revised
form which corrected the excessive ambit of the original version.
74. Thus, contended Mr Unterhalter, the effect of the GoldFields/Harmony cases was that
once a proposed merger existed, and pending the outcome of a merger notification at
the hands of the competition authorities, the intending acquiring party is barred from
voting its shares in the target firm. There was a complete parallel in the present case,
he contended.
75. Mr Unterhalter: 39
"… it was part of a coordinated plan from March to seek to
acquire incremental interests in Johnnic so as to be able to
acquire incremental interests in Johnnic so as to be able to
ensure its ultimate control over [TSH] and there too we say
there was a proposed merger at least from that date. But it
doesn't really matter, because in either event …. [t]here is a
proposed merger before the Commission and the disability then
kicks in, and therefore on that ground, the interdict is competent
and legally, in a sense, required. That is on the basis that the
interdict flows from the proposed merger."
Basis for the declaratory order
76. Mr Unterhalter rejected HCI's contention in its evidence that the
declaratory order sought by Johnnic would be academic. HCI had
attained sole or joint control of Johnnic on the basis set out above, he
said, in contravention of the Act. The entitlement to a declaratory order
39 Transcript at p. 35.
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followed from the contravention. He conceded that the grant of such an
order was discretionary but urged it on the Tribunal as a way of
demonstrating to the public that contraventions had consequences.
HCI's arguments
77. HCI's defence rested on three bases: that there was no harm
threatening Johnnic, that there had been no contravention of the Act,
and that the relief sought by Johnnic was misconceived.
78. The alleged harm to Johnnic stemming from HCI's impending participation in the
voting at Johnnic's general meeting on 27 September was, Mr Gauntlett suggested,
an afterthought. It had clearly been devised when Johnnic's allegations in the
founding affidavit about HCI's moves to acquire further shares in Johnnic had been
deflated by assurances in HCI's answering affidavit that HCI had no intention to
acquire further shares outside the mandatory offfer. This assurance had later been
cemented by the undertaking extended through HCI's attorneys, " couched in words
of one syllable ."
79. The shareholders' meeting scheduled for 27 September 2005 was the " beginning and
end" of the case, Mr Gauntlett contended. The items on the agenda for that meeting
were purely routine and strategically inconsequential – comparable to stereotypical
corporate agenda items such as " parking bays and paternity leave ".
80. Johnnic had produced no evidence to show that any of the items on the agenda for
the meeting of 27 September 2005 was highly controversial or would have a life
changing effect on Johnnic. Mr Gauntlett contrasted this with the facts in the Gold
Fields/Harmony cases, where a special meeting of shareholders of Gold Fields had
been convened at which a controversial and major transaction – a "fork in the road"
for the company – had been in prospect, and on which Norilsk, a 20% shareholder in
for the company – had been in prospect, and on which Norilsk, a 20% shareholder in
Gold Fields, had differed fundamentally from the majority of the board of the company
and had undertaken to vote with Harmony in opposing the resolutions which would
have given the company approval for the transaction.
81. HCI had made a merger notification in the form required by the Act,
and Johnnic had not sought to base its relief on a contention that HCI
had been dilatory in doing so. The notification having been made, it
was irrelevant whether it should have been filed at any earlier date.
Assuming it was necessary to make the notification, HCI had complied
with the Act.
Other contentions on behalf of HCI
82. As regards the contention that HCI had unlawfully implemented a proposed merger in
that all of the steps taken so far by HCI to acquire control of Johnnic constitute the
unlawful implementation, 40 HCI contended that this view of a merging firm's
obligations would lead to absurd consequences. Once a firm has formed an intention
to merge, it will be prohibited from taking any steps to give effect to the intention until
40 Founding affidavit, paragraph 59, p. 23 of the record.
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the merger had been notified and approved. This would be "regulatory stalemate."
83. The correct interpretation, HCI contends, is that a firm can properly
acquire control but cannot implement the control until its merger has
been approved. It is this implementation of control after the acquisition
that amounts to a contravention of s. 13A(3) if approval has not yet
been given by the competition authorities. This view, HCI contends, is
consistent with the principles of merger regulation since competition
authorities have no interest in restraining the activities of an intending
merging party outside the exertion of control.
84. HCI further contends that this view of the matter is fully supported by the Gold Fields/
Harmony cases. Two relevant passages in the first case read: 41
The implication of this procedure is not that the party cannot
continue with its proposal to effect a merger but that it will be
prohibited in terms of section 13A from implementing the merger
until the latter has been approved;
and
What section 13A(3) seeks to prohibit was not the completion of
the merger but any implementation thereof prior to authorisation
having been given by the relevant competition authorities.
85. In another passage cited by HCI the CAC stated in this case that: 42
Were the early settlement offer to constitute a merger as
defined in section 12 of the Act, first respondent would not be
entitled to exercise a controlling influence over the first appellant
pursuant to this offer without having obtained permission from
the competition authorities to do so.
86. The interdict in the Gold Fields/Harmony cases , HCI contends, was therefore directed
at the exertion of a controlling influence, not the acquisition of control. What was
interdicted was not voting of the shares in general, but voting them in a manner which
amounted to implementation of a merger.
amounted to implementation of a merger.
87. In any case, HCI contended, it does not have control over Johnnic. The
evidence in Johnnic's affidavits on this point comes down to
speculation, based on the arithmetic of attendances at Johnnic's most
recent meetings of shareholders. Johnnic is different in nature from
what it was before the unbundling of Johncom. It now possesses a
large sum of cash, and shareholders will be particularly concerned
about how this cash is spent. A high level of shareholder interest and
41 At p. 16 of the CAC decision.
42 At p. 37 of the CAC decision.
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activism can be expected at present. Even on Ms Ramon's table of
attendances, and taking the most recent meeting as the benchmark, a
company would need to have a shareholding of at least half of 90.42%
to command control.
88. Mr Gauntlett also contested the notion that the shareholders in Johnnic were
"fragmented" and by implication unable to assert their interests. On the contrary, they
are " tough" institutional shareholders who are " in it for the money " and so far have
shown " scant inclination to dance to our tune ."
89. The contention that HCI had joint control with the shareholders from whom it had an
irrevocable undertaking to sell their shares on the conditions set out in the mandatory
offer was wholly unfounded, Mr Gauntlett contended. The fact that they had agreed to
sell their shares to HCI did not mean that they would " vote like lackeys " at the
meeting on 27 September. There was no evidence at all that they had formed a
coalition with HCI to vote similarly on any issue.
90. Accordingly, HCI contends, it cannot be found to control Johnnic.
Without control, it cannot implement a merger, and accordingly its
refusal to refrain from using its voting rights at meetings of Johnnic is
justified.
91. As to the relief sought, Mr Gauntlett contended that Tribunal has a discretion whether
to issue a declaratory order even when illegality has occurred. He referred to Baxter,
Administrative Law ,43 in this regard. A declaratory order is an exceptional remedy,
not usually granted together with an interdict.
92. In any case, HCI contends, the declaratory order sought by Johnnic
would extend in perpetuity, for no good reason.
93. The application is, Mr Gauntlett contended, an interlocutory proceeding
pending the Tribunal's consideration of the merger as notified, and the
Tribunal should be cautious in its approach to issues surrounding the
Tribunal should be cautious in its approach to issues surrounding the
merger so that it does not preempt a proper decision on what will be
the main matter.
The Tribunal's conclusions
94. The Tribunal is mindful that this is an application for final relief and
must be decided on a balance of probabilities, not on the somewhat
more generous basis which would apply to an applicant in an
application for temporary relief.
95. Any doubt which may have existed previously about the Tribunal's powers to issue an
interdict sought by a firm on the basis that another is implementing a merger which
has yet to be ruled upon by the competition authorities – thus, a contravention of s.
43 Pages 702704.
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13A(3) of the Act – has been dispelled by the decision of the CAC in the first of the
Gold Fields/Harmony cases, where this power was affirmed and such an interdict was
granted.44
96. It should by now be clear that the answers to the two questions posed
at the outset of this decision would dispose of this case.
97. On the question of the control of Johnnic under s. 12(2(g), we are
satisfied that HCI has not been shown to control Johnnic, whether
singly or jointly with others.
98. There is, as Mr Gauntlett stressed, no evidence of any kind before us
to show that the shareholders who have agreed irrevocably to sell
3.1% of Johnnic's shares to HCI in terms of the mandatory offer will ally
themselves with HCI in any voting choices. There is moreover no
common or customary pattern of behaviour in this regard within our
knowledge to suggest a likelihood that an intending seller's voting
choices at shareholders' meetings will coincide with those of a
shareholder who is in the market for more shares. The allegation of
joint control must fail – it is purely speculative.
99. As to sole control, 40% of a company's shares is not a number which
commands control under any of the provisions of subsections 12(2)(a)
to (f) of the Act. While in other circumstances we might well find that a
shareholding of 40% satisfies the form of control described in s. 12(2)
(g), with its dual content of "material influence" and comparability to the
forms of control expressed in earlier subsections of s. 12, the present
circumstances are very different. The other shareholders in Johnnic,
holding altogether 60%, are in the main, as to some 44.5%, substantial
and in some cases powerful institutions, experienced and shrewd
investors, well capable of advancing and defending their own interests
investors, well capable of advancing and defending their own interests
when they find it necessary by exerting their muscle in the affairs of
Johnnic. They, or a number of them, voted down HCI as recently as 30
June 2005 when HCI had a 30% shareholding and attempted to vote
three of its nominees on to the board of Johnnic, at a meeting where
shareholders holding more than 90% of the issued shares were
present or represented. The outcome of this foray of HCI – not an
attempt to obtain majority representation but merely to secure a voice
in Johnnic's affairs – does not represent control but its antithesis. Had
the foray succeeded we might well have had to reflect deeply on the
question whether the requirements of s.12(2)(g) have been satisfied,
but there is no such need.
100.Does the picture change by reason of the fact that HCI now, since the
meeting on 30 June 2005, has an additional parcel of 10% of the
44 See footnote 38 above for the CAC's rulings on this question.
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Johnnic shares? We see no basis for concluding that there has been
such a sea change. The institutional shareholders still outnumber HCI
in voting power, HCI is still not represented on Johnnic's board, it has
no management contract or voting pool arrangements to influence
Johnnic, and the fact that Johnnic is still actively pursuing a spate of
litigation against Johnnic and is jousting with Johnnic for ownership of
gaming assets is once again the polar opposite of the concept of
material influence by HCI over Johnnic. As we see the matter, the only
difference which the accretion of the last 10% has made is to trigger
the mandatory offer for the balance of the shares in terms of the SRP
Code. As Mr Copelyn has pointed out, even the making of this offer
does not seal Johnnic's fate as a captive of HCI since few shareholders
may accept the mandatory offer, leaving HCI with a shareholding that
is still below the level at which it can exert control whether by any of the
means expressly set out in s. 12(2) or otherwise.
101.The tour we were given by Johnnic at the hearing of the guiding principles and
leading cases regarding the concept of minority control in other countries and regions
was illuminating but not decisive of anything. In countries or regions where there are
very large companies with, by comparison, vast numbers of shareholders, a
numerically small shareholding may well represent far more cohesion and influence in
a listed company than in South Africa, where the investing public is small in number
and where the share registers of many companies are dominated by a handful of
large institutional investors. We must thus use with great caution dicta such as that
reproduced above from the BP case in the UK.
102.Johnnic's approach to the second question posed at the outset of this decision is
102.Johnnic's approach to the second question posed at the outset of this decision is
based on the notion that there can be implementation of a merger before the merger
has taken place. The sleight of hand, if this is what it is, which leads one to this
proposition is the contention that a proposed merger, although being different from
what, for want of a better term, has been called an actual merger or a completed
merger, can carry the obligations of an actual merger. Johnnic relies on the decision
in the first of the Gold Fields/Harmony cases as authority to claim that HCI's course of
action in acquiring a sufficient stake in Johnnic's shares to trigger the requirement for
a mandatory offer amounts to a proposed merger of a kind which, in terms of that
decision, requires notification to the Commission under s. 13A(1) of the Act (and, in
due course, consideration by the competition authorities), and which bars any steps
taken in implementation of the merger until approval for the merger has been
obtained. This is so, Johnnic contends, even though HCI has not yet ascertained
through the mandatory offer whether it will secure sufficient shares to give it control of
Johnnic and hence convert the proposed merger into an actual merger.
103.Mr Unterhalter went, in fact, considerably further and suggested that the decision in
the first Gold Fields/Harmony case placed an obligation on HCI to notify its proposed
merger with Johnnic at the earliest identifiable point in its courtship of Johnnic – even
before it instructed its brokers to acquire its first parcel of shares in Johnnic, in or
about March 2005. Because of the mere intention to merge, a proposed merger had
come into being, he argued, and the rest followed from the Gold Fields/Harmony
decision.
104.While the decisions in the Harmony/Gold Fields cases may carry certain enigmas, we
104.While the decisions in the Harmony/Gold Fields cases may carry certain enigmas, we
do not think they support this line of reasoning. If the CAC had intended to rule that a
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mere intention to bring about a merger amounts to a proposed merger and that such
a proposed merger, if it is an intermediate or a large merger, activates the obligations
set out in subsections 13A(1) and (3), we think that the CAC would have stated the
rule in very different language from that in which its decisions in those matters was
couched.
105.What is a proposed merger? We think it is really nothing more than it says, namely a
proposal, whether bilateral, as in a friendly merger, or unilateral, as in a hostile
merger, where the proposal may come as a nasty shock to the target company when
it is revealed. All large mergers are in a sense proposed mergers, within the
terminology of the Act, until they receive the approval of the Tribunal or the CAC,
since if they have not yet been implemented a prohibition of the merger will mean
than the merger never comes into being. (If a change in control has already been
implemented at the time when the competition authorities rule on the matter, such
premature implementation, in contravention of s. 13A(3), would in all likelihood be
visited with penalties under s. 59(1)(d)(iv) and could possibly lead to divestiture under
s. 60 of the Act.)
106.In short, we consider that the use of the term "proposed merger" in the
Act is not intended to create a category of mergers different from
mergers simpliciter, as referred to generally in the Act. At most the use
of the word "proposed" places some emphasis, in the particular context
where it occurs in the Act, on the fact that the merger is at that stage
prospective.
107.In the Gold Fields/Harmony cases, differing crucially from this case, a voting
agreement was in place between Harmony and Norilsk, a shareholder in Gold Fields
with a 20% holding. Norilsk had entered into a written agreement with Harmony,
hedged with numerous conditions and provisos, to vote with Harmony on what for
convenience may be called the IAMGold resolution, which could have been defeated
by a simple majority at a forthcoming general meeting of the shareholders of Gold
Fields. The CAC categorised the relationship between Harmony and Norilsk as one
seeking joint control, and the case was clearly decided on the basis that Harmony's
socalled early settlement offer would succeed and yield for Harmony a harvest of
34.9% of the shares in Gold Fields. The voting partners, Harmony and Norilsk, were
assured on that basis of an absolute majority when voting took place on the IAMGold
resolution.
108.We should add that while the competition authorities have a clear
obligation under the Act to enforce its provisions, and must be vigilant
to do so, they must be equally vigilant to refrain from interfering with
the ordinary governance of firms. A restraint on the voting rights of a
shareholder is a drastic form of intervention, which we should only
impose when we are convinced that it is warranted.
109.As it is, the reformulated wording of prayer 2 of the relief sought by Johnnic, as
received by the Tribunal on 23 September 2005, still goes beyond an interdict on
voting rights. The interdict sought would restrain HCI from " exercising the voting and/
or other rights attaching to such as shares as it may have acquired in [Johnnic] ". The
"other rights" might easily be construed as including the right to attend shareholders'
meeting or to collect dividends or to sell or pledge the shares. This is clearly
excessive in the light of the concession made by Johnnic's counsel at the hearing
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about the remaining scope of the case.
110.As will be obvious, our answer to the second question posed at the outset of this
decision is in the negative. It follows that Johnnic has failed to make out a case than
an injury has been actually committed or is reasonably apprehended. This is, of
course, an essential requirement for the grant of an interdict of the kind sought by
Johnnic.43
111.The declaratory order sought is, in our view, misplaced. No justification for it exists in
view of our findings as set out above. We note that it too is excessively broad on the
case argued before us, suggesting inter alia that all HCI's shares in Johnnic have
been acquired in contravention of the Act, as well as that the exercise of normal
voting and other rights attaching to the shares before the approval of the merger by
the competition authorities must be seen as unlawful. We have no hesitation in
declining to issue the order sought.
112.The matter is of sufficient complexity, we believe, to have justified the
use by HCI of two counsel, and our order for costs should
consequently be regarded as awarding the costs of an attorney and
two counsel.
21 October 2005
L. Reyburn Date
Concurring: D. Lewis and T. Orleyn
43 Gold Fields Supra at page 14.
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