COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 41/LM/Apr06
In the matter between:
Sun International (South Africa) Limited Acquiring Firm
And
Real Africa Holdings Limited Target Firm
Panel: D Lewis (Presiding Member), N Manoim (Tribunal
Member) and Y Carrim (Tribunal Member)
Heard on: 24 July 2006
Order issued on: 24 July 2006
Reasons issued on: 17 August 2006
Reasons for Decision
APPROVAL
1] On 24 July 2006, the Tribunal approved the merger between Sun International
(South Africa) Limited and Real Africa Holdings Limited. The reasons for
approval follow.
THE TRANSACTION
2] The acquiring firm is Sun International (South Africa) Limited (“Sun
International”). Sun International is controlled by Sun International Limited, a
company listed on the JSE and is part of the Sun International Group. The Sun
International Group holds interests in the leisure, resort and casino industries. It
owns and operates hotels, resorts and casinos throughout South Africa and
internationally.
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3] The target firm is Real Africa Holdings (“Real Africa”), an investment holding
company listed on the JSE. 1 Real Africa has a diverse portfolio of investments.
Through its 66.2% interest in Afrisun Leisure Investments (Pty) Ltd, Real Africa
holds shares in several subsidiaries of the Sun International Group (viz. its
casino operating and casino management companies). 2 Real Africa’s current
interests in these subsidiaries is tabulated below:
4] In terms of the proposed transaction, Sun International intends acquiring the
entire issued share capital of Real Africa. The mechanism for the acquisition
comprises an offer to all the shareholders in terms of section 440 of the
Companies Act 61 of 1973. The effect of the transaction is that Sun
International will acquire Real Africa’s minority stake in all of the subsidiaries of
the Sun International Group where Real Africa has a share. As a result, Real
Africa will cease to be a shareholder in these subsidiaries.
5] By acquiring Real Africa’s minority interests in its operations, the Sun
International Group seeks to create a single listed point of entry into the group
whilst simultaneously increasing the group’s exposure to its own existing core
gaming, hotel and resort activities. 3
IMPACT ON COMPETITION
6] The only overlap in the parties’ activities lies in the minority shareholdings,
which Real Africa holds in the six Sun International Group subsidiary
companies, which minority shares will be acquired through this transaction.
1 Real Africa’s major shareholders are Coronation Capital Ltd (17.92%), Engineering
Industrial Pension Fund (6.28%), Merrill Lynch International (5.75%) and Momentum Group
Ltd (5.14%).
2 Real Africa also has interests in information technology companies, fishing, cold storage
2 Real Africa also has interests in information technology companies, fishing, cold storage
and auxiliary services and healthcare. A list of these subsidiaries can be found on page
481482 of the Commission’s record.
3 For more detail regarding the rationale for the transaction see pages 5556 of the
Commission’s record.
Sun International Group subsidiary Real AfricaEconomic
Interest
Voting share
Capital
Casino Afrisun Gauteng 21 % 25 %
Afrisun KZN 11.5 % 15 % Emfuleni Resorts 2.3 % 15 %Sunwest International 14.1 % 17 %
Casino
Management
National Casino Resort Manco 21.8 % 33 %
Gauteng Casino Resort Manco 30 % 30 %
2
According to the Commission, the transaction simply results in a transfer of
additional shares to the Sun International group of certain of its subsidiaries,
over which it already exercises some measure of control. The form of control
which the group currently exercises over the relevant subsidiaries is shown
below:
7] From the above, it is clear that post merger, the Sun International Group
will not acquire any additional control over Afrisun Gauteng, National
Casino Resort Manco and Gauteng Casino Resort Manco. It will acquire
sole positive control over each of Afrisun KZN, Emfuleni Resorts and Sunwest
International as it will be able to vote the majority of votes that may be cast at
general meetings of these companies. In light of this, w e agree that the
acquisition does not result in any aggregation of market share or increased
concentration in South Africa.
Subsidiary Current Interest
(shareholding)
Form of Control currently
exercised by the Sun
International Group
Afrisun Gauteng
60% voting share capital
and 70% effective
economic interest
Sole control
Afrisun KZN
44% voting share capital
and 56.1% effective
economic interest
Management responsibility +
Negative control by virtue of
minority protections
Emfuleni Resorts
49% voting share capital
and 70.2% effective
economic interest
Management responsibility +
Negative control by virtue of
minority protections
Sunwest International
49% voting share capital
and 58.8% effective
economic interest
Management responsibility +
Negative control by virtue of
minority protections
National Casino
Resort Manco
Sun International Limited
holds 60% voting capital
of National Casino Resort
Manco Holdings which
holds 50% of National
Manco Casino Resort
Manco
Voting control
Gauteng Casino
Resort Manco
Sun International Limited
holds 60% voting capital
of National Casino Resort
Resort Manco
Sun International Limited
holds 60% voting capital
of National Casino Resort
Manco Holdings which
holds 50% of Gauteng
Casino Resort Manco
Voting control
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8] Furthermore, with regard to Real Africa’s nongaming interests, the Sun
International Group has indicated that it is its intention to dispose of all
these noncore interests after completion of the proposed transaction.
CONCLUSION
9] Based on the above, we agree with the Commission that the transaction is
unlikely to substantially prevent or lessen competition in any of the markets that
the merging parties are active in. There are no public interest issues and we
accordingly approve this transaction without conditions.
D Lewis
Y Carrim and N Manoim concurring
Tribunal Researcher: M MuruganModise
For the merging parties: Advocate A Cockrell instructed by Edward Nathan for Sun
International (South Africa) Limited and H Irvine (Deneys
Reitz) for Real Africa Holdings Limited
For the Commission: M Mohlala and G Mudzanani (Mergers and Acquisitions)
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