COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 58/LM/Jun07
In the matter between
Metropolitan Holdings Ltd Acquiring Firm
And
HTG Life Ltd Target Firm
Panel : N Manoim (Presiding Member), L Reyburn (Tribunal Member)
and M Mokuena (Tribunal Member)
Heard on : 11 June 2007
Decided on : 11 June 2007
Reasons Issued : 05 September 2007
REASONS
Approval.
[1]. On 11 June 2007 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Metropolitan Holdings Ltd (“Metropolitan”) and HTG Life Ltd
(“HTG”) unconditionally. The reasons appear below.
Parties.
[2]. The acquiring firm is Metropolitan Holdings Ltd (“Metropolitan”) a publicly listed
company.1 Metropolitan is not controlled by any single shareholder.
[3]. The target firm is HTG Life Ltd (“HTG Life”). HTG is controlled by Doves Group (Pty)
Ltd (“Doves Group”). 2 Doves Group is controlled by NUMSA Investment Company (Pty) Ltd
(“NIC”). 3
Transaction.
[4]. The transaction involves the acquisition by Metropolitan of the entire issued share
1 The merging parties have submitted in the filing that Metropolitan largest institutional shareholders are: Kagiso
Trust Investment Property Ltd 19.7%, Metropolitan employee share trust 6.6%, Public Investment Corporation
8.7% and Sanlam 4.2%.
2 Doves Group is controlled by Numsa Investment Company (Pty)Ltd
3 NIC is controlled by National Manufacturing Workers Investment Trust and the National Union of Metal Workers
of South Africa.
1
capital in and claims against HTG Life from Doves Group. The parties have submitted in
their filing that Metropolitan and NIC will create a separate joint venture company to be
known as Union Money (“UM”) 4 which will be owned in equal shares between Metropolitan
Card Operations (Pty) Ltd (“MCO”), a wholly owned subsidiary of Metropolitan and NIC.
Rationale for the Transaction.
[5]. From the acquiring firm’s perspective the rationale is to gain access to the lower
income markets (through NUMSA’s membership base) and to market its products directly to
NUMSA members with the support of the trade union itself. The proposed transaction will
also allow the acquiring firm to use its proven managerial expertise to maximise the potential
growth of HTG Life, enhance operational efficiency and extract optimal synergies between
itself and HTG Life.
[6]. From the target firm’s perspective the transaction will enable its low income workers
to have access to better targeted financial products and life insurance products designed
and priced to meet their specific needs.
Activities of the Parties.
[7]. Metropolitan is involved in life insurance, employee benefits/retirement fund services,
medical aid and managed healthcare, asset management, unit trusts, property services and
banking services. HTG Life is a registered long term insurer that conducts business of
providing policy benefits under assistance and life insurance policies.
Relevant Market.
[8]. The Commission has defined the relevant market as being the market for the
provision of long term insurance that can further be segmented into assistance policies and
life policies where the overlap of the merging parties occurs.
Competition Analysis
[9]. In its analysis of the proposed transaction the Commission found that the proposed
transaction will result in both horizontal and vertical effects. According to the Commission
transaction will result in both horizontal and vertical effects. According to the Commission
there is an overlap in the activities of the merging parties in the provision of assistance and
life policies. In the specific markets for assistance policies and life policies the combined
market shares are 5% for assistance business and 6% for life business. As can be seen
from the market shares above, the merging parties post merger market shares in both
markets is relatively low , we therefore agree with the Commission’s conclusion that since
4 UM will provide brokerage services and will exclusively market certain of Metropolitan’s and HTG Life’s long
term insurance products as a preferred supplier of such long term insurance products to members of NUMSA.
2
the market shares are low, the proposed transaction is unlikely to substantially prevent or
lessen competition. The vertical effects will be created when Metropolitan and NIC form a
joint venture. According to the Commission, Metropolitan as a provider of financial services
will be able to market its products directly to NUMSA members through their marketing
channels. The Commission’s investigation has revealed that the merging parties, after the
merger, will continue to face a number of strong and effective competitors notably Old
Mutual, Sanlam Life Assurance, Liberty Active, Alan Gray, Standard General, RMB
Structured Life, AVBOB and Capital Alliance amongst others. We therefore agree with the
Commission that the proposed transaction is unlikely to result in customer foreclosure as the
market is characterised by many firms with variety of products.
Public Interest.
[10]. There are no public interest issues.
Conclusion.
[11]. Based on the above the transaction will not result in a substantial lessening or
prevention of competition in the identified markets and is accordingly approved
unconditionally.
___________________ 05 September 2007
N.Manoim Date
Tribunal Member
L Reyburn and M Mokuena concurring
Tribunal Researcher : J Ngobeni
For the merging parties : Jocelyn Katz (Edward Nathan Sonnenburg)
For the Commission : Lindiwe Khumalo (Mergers and Acquisitions)
3