COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 106/LM/Nov05
In the large merger between:
Liberty Group Limited
And
Investec Employee Benefits Limited
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Reasons
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Introduction
1. On 25 January 2005 the Competition Tribunal approved the merger
between Liberty Group Limited and the Investment only business of
Investec Employee Benefits (Pty) Ltd. The reasons are set out below.
The transaction
2. This transaction follows on a related transaction, which the Tribunal
had approved on 5 August 2003. 1 In that transaction Liberty acquired
Investec Employee Benefits’ business of marketing, underwriting and
administering group retirement fund products, excluding individual
assurance and investment products and annuities.
3. The current transaction gives effect to the acquisition of the Investment
Only Business of Investec Employee Benefits Ltd (“IEB”) by Liberty
Group Ltd.
4. Liberty Group Ltd, the acquiring firm, is a public company listed in the
life assurance sector on the JSE Securities Exchange of South Africa.
Its controlling shareholder is Standard Bank Group Ltd.
5. IEB is a longterm insurer registered as such in terms of the Longterm
Insurance Act No 52 of 1998, as amended. IEB is a wholly owned
subsidiary of Investec Employees Benefits Holdings Ltd.
1 Tribunal Case No: 32/LM/Jun03.
Rationale for the transaction
6. According to Liberty the exclusion of the Investment Only business
from the original transaction in 2003 has led to complications in that
both IEB and Liberty are left with policies in the same investment
portfolios. In order to avoid them from having to retain portfolio
alignment into the future, the parties have agreed that it would be
preferable for Liberty to purchase the balance of the policies in the
investment portfolios because IEB does not have the administration or
technical resources to administer the IEB Investment Only Business
effectively.
Effect on competition
7. The Commission and the parties differed in their definition of the
relevant market. According to the parties the relevant market should be
defined narrowly, as the national market for the provision of investment
management services to retirement funds. Although the Commission
acknowledges that it is within the more narrow services market in
which the parties’ activities overlap it chose to define a broad product
market namely the national market for the provision of asset
management services.
8. However, we do not have to make a definitive finding on the relevant
market as we are of the view that, based on the merged entity’s low
market share, the merger would not result in a substantial lessening of
competition. The merged entity will have a market share of 11.2%
within the asset management market and will be the third largest player
in a market where many compete. The largest players in this market
are Old Mutual Life Assurance Company (18.2%) and Sanlam
Investment Management (15.6%). Within the narrow definition, as
submitted by the parties, the market share of the merged entity would
be approximately 5.8%.
submitted by the parties, the market share of the merged entity would
be approximately 5.8%.
9. Barriers to entry are low and according to the parties there have been
10 new entrants into this market since 2003.
10. The merger is therefore unlikely to lessen competition.
Public interest issues
11. This transaction does not raise any public interest issues.
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____________ 14 February 2006
Y Carrim Date
Concurring: L Reyburn, U Bhoola
3