COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 94/LM/Sep05
In The Large Merger Between:
Sanlam Life Insurance Limited Acquiring Firm
And
Channel Life Limited Target Firm
Reasons for Decision
Approval
1. On 18 January 2006 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Sanlam Life Insurance Limited and Channel Life Limited.
The reasons for this decision follow.
The Transaction
2. The parties to the transaction Sanlam Life Insurance Limited (“Sanlam Life”) and Channel
Life Ltd (“Channel Life”). Sanlam Life is a wholly owned subsidiary of Sanlam Ltd, 1 a public
company listed on the life assurance sector of the JSE Securities Exchange South Africa. 2
Channel Life’s shareholding is held as follows: Channel Life Holdings (Pty) Ltd – 48.65%, 3
PSG Financial Services Ltd – 40.61% and Channel Life management and a number of
members of the public 10.74%. 4
1 According to the parties, Sanlam Ltd is not controlled by any single firm. Details about Sanlam Ltd’s
varius subsidiaries can be found from page 131136 of the Merger Record.
2 Sanlam Life controls the following firms: Sanlam Customised Insurance Ltd, Sanlam Home Loans (Pty)
Ltd, Total Care Strategy Holdings (Pty) Ltd, Sanlam Direct Access (Pty) Ltd, Sanlam Trust Ltd, Encoresa
(Pty) Ltd and Cambium Capital Joint venture.
3 Channel Life Holdings is jointly controlled by Arch Equity Life Holdings (26%) and PSG Group Limited (74%).
4 Channel Life controls the following companies: Channel Life Equity (Pty) Ltd, Channel Management Services
(Pty) Ltd, Alfinanz (Pty) Ltd, Kea Insurance Brokers (Pty) Ltd and Channel Group Limited.
2.1.1. The transaction involves firstly, the acquisition by Sanlam Life of 52% of
the issued shares in Channel Life. Sanlam Life will then transfer its 55%
stake in Safrican Insurance Company Limited to Channel Life, in
consideration for the issue to Sanlam Life of a further 8 million shares in
Channel Life (constituting approximately 2.8% of the issued share
capital). Post merger Sanlam Life will own and control approximately
54.8% of the issued share capital of Channel Life. Although Channel Life
will own and control 55% of the issued share capital of Safrican,
ultimately Sanlam Life will control Safrican through its majority
shareholding in Channel Life. Channel Life Holding and PSG will retain a
noncontrolling minority shareholding interest in Channel Life.
3. According to the parties, Sanlam Life wishes to harness the potential that Channel Life’s
business has to generate good results in areas whether Sanlam Life is underperforming,
namely new business growth in the entrylevel market segment.
Impact on Competition
4. Both Sanlam Life and Channel Life are registered longterm insurers and offer individual and
group insurance products. While the Commission did not conclude on a relevant product
market, it did base its assessment on both a narrow market (individual and group based
products which may be further segmented into individual investment and insurance
products, and lower income and middle and higher income segments) and a broader long
term insurance product market. The markets were geographically defined as national.
5. The Commission found that from a narrow or broad market perspective, Sanlam Life’s
market share does not increase significantly and that no significant changes in the
concentration levels occur. The Commission also found that in the shortterm, Sanlam Life
concentration levels occur. The Commission also found that in the shortterm, Sanlam Life
will compete with larger established players like Metropolitan Life, Liberty Active, Hollard Life
Assurance and Clientele Life and that within the middle to longterm, entry will become
easier and more players will attempt to compete in the market. Furthermore, greater product
innovation would result in increased competition.
6. Although we agreed with the Commission’s conclusion, we were concerned that the market
shares submitted by the merging parties and on which the Commission based its
assessment, were outdated (July to December 2004). During the hearing held on the 18
January 2006, the Tribunal requested the merging parties to provide it with more updated
data. The merging parties subsequently submitted market shares for individual and group
products for the period January 2005 to June 2005. 5
7. The market shares for individual products based on total individual premiums received were:
Firm Market Share %
5 Correspondence with Tribunal dated 14 February 2006.
2
1 July 2004 to
31 December 2004
1 January 2005 to 30 June
2005
Sanlam Life 20 18
Safrican 0 0
Channel Life 1 0
African Life 2 2
Combined 22 20
Others 78 80
Total 100 100
Source: Life Office’s Association of South Africa
8. The market shares for group products based on total group premiums received were:
Firm Market Share %
1 July 2004 to
31 December 2004
1 January 2005 to 30 June
2005
Sanlam Life 11 9
Safrican 0 0
Channel Life 1 0
African Life 2 0
Combined 14 10
Others 86 90
Total 100 100
Source: Life Office’s Association of South Africa
9. The updated data reveals that the combined market shares of the merging parties in 2005
decreases by 2% for individual products and by 4% for group products. Furthermore the
market share accretion post merger is relatively small, namely 2% for individual products
and 1% for group products.
10. For these reasons, we are of the view that the merger will not result in a substantial
lessening of competition and it is not necessary for us to make a definitive finding on the
relevant markets.
Conclusion
11. We have no other concerns and are satisfied that there are no significant public interest
issues, which arise, and we accordingly approve this transaction unconditionally.
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9 March 2006
Y Carrim Date
Concurring: N Manoim and T Orleyn
For the merging parties: J Oosthuizen (Sonnenburg Hoffmann Galombik)
For the Commission: L Lamola and S Nunkoo (Mergers and Acquisitions)
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