COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 55/LM/Jun06
In the matter between:
NETCARE KWAZULU (PTY) LTD Acquiring Firm
and
TRESSO TRADING 119 (PTY) LTD Target Firm
_______________________________________________________________
Panel : N Manoim (Presiding Member), L Reyburn (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 02 August 2006
Order Issued on : 02 August 2006
Reasons Issued on : 18 August 2006
REASONS FOR DECISION
Approval
[1] The Competition Tribunal issued a Merger Clearance Certificate on 02
August 2006 approving without conditions the proposed merger between
Netcare KwaZulu (Pty) Ltd (“Netcare KwaZulu”) and Tresso Trading 119
(Pty) Ltd (“Tresso”).
The parties and the merger transaction
[2] Netcare KwaZulu (the primary acquiring firm) is buying a property (the
Umhlanga Hospital which is situated at Umhlanga Rocks, in Durban)
from Tresso (the target firm). Netcare KwaZulu is a wholly owned
subsidiary of Netcare Hospital Group (Pty) Ltd (“Netcare Hospital
Group”).1 Netcare has interest in a number of business entities, the
relevant entity for our analysis being Netcare Property Holdings (Pty) Ltd
(“Netcare Property”). Tresso is an unlisted property loan stock company. 2
[3] In terms of the proposed transaction, Netcare KwaZulu will acquire the
property from Tresso. Netcare KwaZulu is the present lessee of the
target firm’s property. In other words, Netcare KwaZulu is lessee of the
property prior to the proposed acquisition and will become the owner and
occupant of the property post acquisition. We are advised that the target
property was previously leased to Umhlanga Medical Centre Ltd
(“Umhlanga Medical Centre”) by Tresso. 3 Furthermore, on 15 February
2006 Netcare KwaZulu took cession of the lease between Tresso and
Umhlanga Medical Centre from Umhlanga Medical Centre. The effect of
such a cession is that Netcare KwaZulu will, as stated above, become
the lessee of the target property. Tresso took a decision to sell the
aforesaid property to Netcare KwaZulu hence the present transaction. 4
[4] Prior to the proposed transaction, the target property was owned and
controlled by Tresso. Postacquisition, Netcare KwaZulu will own and
control the aforesaid property.
Rationale for the transaction
[5] From Netcare’s perspective, the proposed acquisition presents Netcare
with an ideal opportunity to increase its savings on current and future
rentals given that postmerger Netcare will be the owner as opposed to it
being the lessee of the property.
[6] The current Tresso shareholders have made a strategic decision to
divest from the property industry entirely. 5
The relevant market
[7] We are for purposes of this transaction focussed on the market of
[7] We are for purposes of this transaction focussed on the market of
1 Netcare Hospital Group is a wholly owned subsidiary of Clinic Holdings Ltd (“Clinic Holdings”),
which is ultimately wholly owned and controlled by Network Healthcare Holdings Ltd (“Netcare”).
Netcare is a public company listed on the JSE, and is not controlled by any single shareholder.
However, Netcare’s largest shareholders which hold 5% or more of its total issued shares are
Netpartner Investments Ltd (18.7%) and The Public Investment Corporation Ltd (17.29%).
2 Tresso is controlled by Investec Employee Benefits Ltd (76.92%), Capital Alliance Life Ltd
(18.96%) and Standard Bank Nominees for Liberty Group Ltd (4.12%).
3 Umhlanga Medical Centre is a wholly owned subsidiary of Netcare Hospital Group.
4 See the merging parties’ second letter to the Commission dated 10 July 2006 together with
the merging parties’ Sale Agreement.
5 See pages 48 and 68 of the merger record.
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property ownership especially with regards to hospital buildings. As
stated above, Netcare’s core business is the ownership, operation and
management of hospitals and related healthcare organisations. The
target property is a building currently used as a hospital in Umhlanga
Rocks, Durban. It will continue to be used as a hospital postmerger. We
have already highlighted that the target property is currently leased to
Netcare KwaZulu (the acquiring firm) in terms of a long term lease that
expires on 13 June 2017.
[8] Tresso’s business is that of a property owner and derives its income from
rentals received from the tenants in the properties it owns. The merging parties
advised us that Tresso has to date sold the bulk of its property portfolio and that
it is in the process of transferring those properties.
[9] In the result, we need not make a definitive finding on the relevant
market.
Competition analysis
[10] The transaction converts Netcare’s rights to the property from that of long
terms lessee to owner. As such the merger does not impact on either
barriers to entry in the hospital market or have any significance in the
property market. We need not analyse this merger any further as in our
view the proposed merger is unlikely to result in the substantial
prevention or lessening of competition in the relevant markets.
Public Interest
[11] The merging parties submitted that proposed transaction would not have
an impact on any public interest aspects. In addition, the merging parties
anticipate no job losses post merger.
Conclusion
[12] We are satisfied that the proposed transaction is unlikely to result in a
substantial lessening or prevention of competition in the relevant
markets. We accordingly approve the proposed transaction
unconditionally.
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N Manoim
L Reyburn and M Mokuena concurring.
Tribunal Researcher: T Masithulela
For the merging parties : Z Mngadi ( Jowell Glyn & Marais Inc)
For Netcare Group : A Norton ( Webber Wentzel Bowens )
For the Commission : D Motsamai assisted by M Mohlala and E
Ramohlola (Mergers & Acquisitions)
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