COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 75/LM/Aug05
In the large merger between:
MediClinic Investment (Pty) Ltd
and
Wits University Donald Gordon Medical Centre (Pty) Ltd
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Reasons
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Introduction
The Competition Tribunal approved the merger between MediClinic Investment
(Pty) Ltd and Wits University Donald Gordon Medical Centre (Pty) Ltd on 12
October 2005. The reasons are set out below.
The transaction
MediClinic Investment (Pty) Ltd (“MediClinic”) will acquire 49.9% of the issued
share capital of Wits University Donald Gordon Medical Centre (Pty) Ltd
(“WUDGMC”). Medi linic is a wholly owned subsidiary of MediClinic
Corporation Ltd. It owns and manages a range of private hospitals throughout
South Africa. WUDGMC is controlled by the University of the Witwatersrand
(”Wits”) and owns one private hospital in Parktown, Johannesburg. It also
controls Kenridge Dispensary (Pty) Ltd.
MediClinic will conclude a shareholders’ agreement with Wits University, the
remaining shareholder with 50.1%, in terms of which it will obtain minority
protection rights. MediClinic will also manage the hospital in terms of a
management agreement.
Rationale for the transaction
Apart from expanding its presence in Johannesburg, MediClinic’s hospitals and
doctors will be kept abreast of evidencebased medicine as well as securing the
training of and exposure to specialists. MediClinic will also benefit from its
association with the Wits University brand and the merger will increase the
possibility of accreditation of certain units at its other hospitals in Johannesburg
as teaching units affiliated to Wits.
WUDGMC will acquire additional capital to, inter alia, purchase new equipment
and Medi linic’s procurement power will reduce WDGM’s costs and overheads.
Effect on competition
Both the merging parties are active in the product market for the provision of
private hospital services.
MediClinic is one of only three major private hospital groups in South Africa and
and owns 6209 beds nationally of which 1515 are in Gauteng. WUDGMC owns
one private hospital with 190 beds in Parktown, Johannesburg.
The Competition Commission considered the effect of the transaction within a
local as well as a national geographic market. Within a local market the merged
entity’s market share will increase from 10.9% to 14% with its largest competitor
being Netcare with 55.8% and the second largest being Life Healthcare with
30%. In a national market the merged entity will have a market share of 30.4%
with the largest player being Netcare with 36.6% and the second largest Life
Healthcare with 32.9%.
WUDGMC is a relatively small player in the private hospital market, which is
dominated by three large competitors. Its market share in the local market is
3.1% and in the national market 0.9%. We agree with the Commission that,
based on its low market share, WUDGMC could not be regarded as an effective
competitor exiting the market.
competitor exiting the market.
The Tribunal accordingly finds that the transaction will not substantially prevent
or lessen competition in the private hospital market whether the market is defined
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as local or national.
Public interest
According to the merging parties a maximum of 25 of the 306 employees, i.e.
senior management and administrative staff, of WUDGMC might, in a worstcase
scenario, be retrenched. However the parties informed the Commission that
these staff members would be considered and accommodated for 23 new
positions that will be created as a result of the transaction.
____________ 2 November 2005
Y Carrim Date
Concurring: D Lewis, N Manoim,
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