COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 15/LM/Feb06
In The Large Merger Between:
Old Mutual Properties (Pty) Ltd Acquiring Firm
And
Marriott Property Services (Pty) Ltd
Marriott Asset Management (Pty) Ltd
Marriott Corporate Services (Pty) Ltd
Marriott Unit Trust Management Company Limited Target Firms
Reasons for Decision
Approval
1. On 22 March 2006, the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Old Mutual Properties (Pty) Ltd and Marriott Property
Services (Pty) Ltd, Marriott Asset Management (Pty) Ltd, Marriott Corporate Services (Pty)
Ltd and Marriott Unit Trust Management Company Limited. The reasons for this decision
follow.
The Transaction
The Parties to the transaction
2. The acquiring firm is Old Mutual Properties (Pty) Ltd, a wholly owned subsidiary of Old
Mutual SA Limited. 1
3. The target firms are Marriott Property Services (Pty) Ltd, Marriott Asset Management (Pty)
Ltd, Marriott Corporate Services (Pty) Ltd and Marriott Unit Trust Management Company
Limited. Marriott Holdings Limited holds 100% of the share capital of each of the target
firms. RMBT Holding Limited (“RMBT”) holds 100% of Marriott Holdings. 2 According to the
parties, no individual shareholder controls RMBT. 3
1 Full details of the Old Mutual Group structure can be found from page 91121.
2 The structure of the Marriott Group can be found on page 388 of the record.
3 The parties do however refer to Grindrod Limited as a major shareholder of RMBT – see page 52 of the
record.
The Structure of the transaction
4. Old Mutual Properties is acquiring from Marriott Holdings, all of its shares in and claims
against the target firms, as well as:
4.1. RMBT’s claim against Marriott Corporate Services;
4.2. Marriott Corporate Property Bank Limited’s 4 claim against Marriott Corporate Services
and Marriott Asset Management; and
4.3. White Stork Limited’s 5 shares in and claims against Marriott Isle of Man Limited. 6
Rationale for the transaction
4.3.1.For Old Mutual Property, the transaction represents an opportunity for growth by
acquisition. 7 For Marriott Holdings, it allows its shareholders to realize their
investment, and exit the market. 8
Competition analysis
5. Both parties, either directly or indirectly, are involved in property management, institutional
asset management, unit trust management, property asset management and life assurance
products. 9 The Commission analysed all these activities under the broad market for asset
management (with sub markets for property management, institutional asset management,
life assurance products, property asset management and unit trust management). The
parties’ instead identified two separate markets for property management and asset
management (with sub markets for institutional and retail asset management, life assurance
products, property asset management and unit trust management.
6. Despite its identification of a broad market the Commission relied on data provided by the
parties in their competitiveness report. Although the parties’ market share figures for the
asset management market did not include the property management sector, the
Commission nevertheless transcribed this data from the parties’ report and reported the
figures as the market shares for their broadly defined asset management market (in other
words including property management).
words including property management).
7. During the hearing held on the 22 March 2005, the Tribunal asked the Commission to
explain its differing view of the relevant market:
MS KHUMALO : The Commission looked at asset management as a whole and so we took
4 A subsidiary of Marriott Holdings.
5 An off shore entity which the merging parties state has an almost identical shareholding spread to that
of RMBT Holdings.
6 An off shore entity.
7 See page 380 of record.
8 See page 52 of the record.
9 For more details regarding the parties’ activities see pages 5358 of the record as well as pages 56 of
the Commission’s Report.
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everything that forms part of wealth creation as asset management hence we looked at asset
management as the market for this transaction. So we just looked at the all the subsections of
asset management, which contributes to the creation of wealth and encompassed it under asset
management.
8. While we are of the view that is unnecessary to make a definitive finding on the relevant
market, for these purposes, we will accept the parties’ definition of two separate markets,
Both the Commission and parties were in agreement that the relevant geographic market is
national.
Property Management
9. The parties provided the following market share estimates for the largest participants in the
property management market:
Table 1: Property Management
Firm % Market share
Broll 17.5
Gensec 15
Investec 8.6
Old Mutual Property 7.2
Liberty 6.3
Rand Merchant Bank 5.1
Marriott 4.9
Source: Taurus Report and parties’ estimates
10. Post merger, the merged entity will account for approximately 12.1% of the property
management market. According to the parties, customers have strong countervailing power
and can, without cost, switch service providers should prices increase or service levels drop.
Asset Management
11. The parties similarly provided market share estimates for the largest participants in the asset
management sub markets. Firstly, the market for institutional and retail asset management:
Table 2: Institutional and Retail asset management
Firm % Market share
Old Mutual Asset Management 20.3
Sanlam Investment Management 17.3
Stanlib 12.7
RMB Asset Management 10.4
Investec Asset Management 8
12. Secondly, the market for life assurance products:
3
Table 3: Life Assurance Products
Firm % Market share
Liberty 28.3
Old Mutual Life Assurance Company 22.4
Momentum 14.4
Sanlam 12.4
Metropolitan 7
13. According to the parties, in both the sub markets for institutional and retail asset
management and for life assurance products, Marriott Asset Management has a share of
less than 1%. 10 The parties submit that this is insignificant and therefore unlikely to impact
competition in this market.
14. The parties provided the following data for the market for property asset management:
Table 4: Property Asset Management
Firm % Market share
Liberty 12.5
Sanlam/Gensec 10.5
Old Mutual Property 8
Investec 7
Madison 7
Marriott Asset Management 4.2
Rand Merchant Bank 3.7
15. In the market for property asset management, the merged entity’s combined market share
will be 12,2%. The parties submit that the market shares must be viewed in the context of
the broad asset management markets, and that since Old Mutual Property provides these
services only to Old Mutual Life Assurance Company (South Africa) Limited 11 and to Old
Mutual Asset Managers, Old Mutual Property itself does not compete in this market.
16. Finally, the market for unit trust management:
Table 5: Unit Trust Management
Firm % Market share
Stanlib 15.8
ABSA 10.9
Sanlam 9.1
Investec 8.6
10 Old Mutual Asset Managers has a 20.3% share of the Institutional and Retail Asset management
market and Old Mutual Life Assurance Company (South Africa) Limited has a 22.4% share of the Life
Assurance products market. See page 6263 of the record.
11 An institutional investor in the Old Mutual Group of companies.
4
MCubed 8.1
Old Mutual Unit Trust Managers 7.6
Allan Gray 7
17. According to the parties Marriott Unit Trust Management Company accounts for
approximately 1.6% of this market. The parties further submit that the combined market
share of approximately 9.2% will not have a substantial effect on competition in the unit trust
management market when regard is had to the larger market shares of the competitors
listed above and the extensive countervailing power of customers.
18. Having regard to the submissions made by the parties regarding the markets for property
management and asset management (including all the sub markets identified above) as well
as the submissions made by the Commission regarding the broad asset management
market, we agree that the transaction is unlikely to substantially prevent or lessen
competition.
19. There are no public interest issues which arise.
Conclusion
20. We accordingly approve the transaction for the above reasons.
9 May 2006
Y Carrim Date
Concurring: M Moerane and L Reyburn.
For the merging parties: L Mendelsohn (Edward Nathan (Pty) Ltd).
For the Commission: L Khumalo (Mergers and Acquisitions).
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