COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:109/LM/Dec06
In the matter between:
Cleansheet Investments (Pty) Ltd Acquiring Firm
And
Alexander Forbes Limited Target Firm
Panel : DH Lewis (Presiding Member), N Manoim (Tribunal Member),
and Y Carrim (Tribunal Member)
Heard on : 24 January 2007
Decided on : 24 January 2007
Reasons Issued: 24 January 2007
Reasons for Decision
Approval
1] On 24 January 2007, the Competition Tribunal unconditionally approved the
merger between Cleansheet Investments (Pty) Ltd and Alexander Forbes
Limited. The reasons for approving the transaction follow.
The Parties
2] The primary acquiring firm is Cleansheet Investments (Pty) Ltd (‘Bidco’), a
company incorporated under the laws of South Africa. Cleansheet is controlled
by Richtrau No. 131 (Pty) Ltd (‘EquityCo’). EquityCo is a newly formed
consortium comprised of the following shareholders holding the indicated
percentage shareholding:
Private equity investors comprising the following participants:
[2.1] Actis AF Holdings Limited – 17%; 1
[2.2] Ontario Teachers’ Pension Plan Board – 22%;
[2.3] Caisse de depot et placement du Quebec – 14%;
[2.4] Ethos Capital V GP (SA) (Pty) Ltd – 12%; 2
[2.5] HabourVest – 5%; 3
BEE shareholders comprising the following:
[2.6] Shanduka Group (Pty) Ltd – 10%;
[2.7] AFSAH Employee Investments (Pty) Ltd – 6%;
[2.8] Alexander Forbes Community Trust – 4%; and
[2.9] Management Trust – 10%. 4
1 This shareholding will further be divided between the following entities: 1) Actis Africa Fund 2
LP, a limited partnership established in England and managed by Actis Capital LLP, and ii)
CIFA Investments LP, a limited partnership established in England and jointly managed by
Actis Capital LLP and Cordiant Capital Incorporated (herein collectively referred to as ‘Actis’).
2 The shareholding shall be further divided between Ethos Capital V GP (Jersey) Limited and
the Trustees for the time being of Ethos Fund V CoInvestment Trust (herein collectively
referred to as ‘Ethos’).
3 This shareholding will be held by HabourVest International Private Equity Partners VDirect
Fund LP and HabourVest Partners 2004 Direct Fund LP (herein collectively referred to as
‘HabourVest’).
4 The management trust has not yet been created but it is envisaged to comprise of senior
managers currently employed by Alexander Forbes. It does not form part of the BEE
participants in this transaction.
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3] The parties submitted that there is no single firm that will control EquityCo. In
addition EquityCo’s shareholders shall not be entitled to enter into any voting
pool agreement. 5
4] The primary target firm is Alexander Forbes Limited (‘Alexander Forbes’), a
public company incorporated under the laws of the Republic of South Africa.
Alexander Forbes is not controlled by any firm. The following are Alexander
Forbes’ major shareholders holding the following percentage shareholding:
[4.1] Venfin Risk Services Investments (Pty) Ltd – 24.5%;
[4.2] Sanlam Investment Management – 8.7%;
[4.4] Genesis Investments – 6.4%;
[4.5] Stanlib Asset Management – 5.4%; and
[4.6] Mondrian Investment Partners – 5.7%.
5] Alexander Forbes controls firms in excess of one hundred. 6
Rationale for the transaction
6] Bidco views the proposed transaction as facilitating its investment in quality
business in important sectors of the South African economy, with strong
existing management and BEE partners.
5 See clause 10.9 of the Amended and Restated Shareholders’ and Subscription Agreement
between the parties (p190 of the record). At the hearing the parties confirmed that there is no
shareholder who will control EquityCo.
6 Record pp 3133.
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7] The shareholders of Alexander Forbes entered into this transaction because
they claim that they were given an attractive offer they could not refuse.
The Transaction
8] In terms of this transaction, Bidco will acquire the entire issued share capital of
Alexander Forbes.
The parties’ activities
9] Bidco is a newly formed company controlled by EquityCo. EquityCo is a newly
formed consortium that has not begun trading. 7
10] Alexander Forbes, the primary target firm, offers multimanagement
investment, employee benefit consulting, retirement fund administration,
corporate insurance broking, cell captive insurance and personal insurance
products and services. 8
Market Definition
11] As noted by the Commission and the merging parties, it is unnecessary to
define the relevant product and geographic market since there is no overlap in
the activities of the merging parties.
Competition analysis
12] The Commission stated that it is not necessary to enter into a detailed
assessment of the competitive effects of the merger other than to note that
there is no overlap in the activities of the merging parties. The Commission
submitted that it is of the opinion that the proposed transaction is unlikely to
substantially prevent or lessen competition in any market as there is no overlap
in the activities of the merging parties.
7 Refer to pp 4648 of the record for a detailed description of the activities of the parties
holding shares in Bidco. These activities differ markedly to the services offices by Alexander
Forbes.
8 Refer to pp4953 for a detailed description of the activities of Alexander Forbes.
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13] The Tribunal finds that indeed there is no overlap in the activities of the parties
and as a result, there is no need to define the relevant market and to conduct a
detailed analysis of the competition environment.
Public Interest
14] There are no public interest issues.
Conclusion
15] The proposed merger is unlikely to substantially prevent or lessen competition
as there is no overlap in the activities of the merging parties. There are no
significant public interest issues raised by this transaction. Accordingly, the
merger is approved unconditionally.
________________ 24 January 2007
Y Carrim DATE
Tribunal Member
DH Lewis and N Manoim concur in the judgment of Y Carrim
Tribunal Researcher: R Kariga
For the merging parties: V Koovejee, Deneys Reitz Attorneys and M Gorden,
Edward Nathan Sonnebergs.
For the Commission : K Mahlakoana (Mergers
and Acquisitions)
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