COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 31/LM/Mar07
In the matter between:
Firstrand Investment Holdings (Pty) Ltd Acquiring Firm
and
Rentworks Africa (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member), N Manoim (Tribunal
Member), and Y Carrim (Tribunal Member)
Heard on : 23 July 2007
Decided on : 23 July 2007
Reasons Issued: 13 September 2007
REASONS FOR DECISION
Approval
1] On 23 July 2007 the Competition Tribunal approved the merger between Firstrand
Investment Holdings (Pty) Ltd and Rentworks Africa (Pty) Ltd. The reasons are set
out below.
The parties to the transaction and the transaction
2] The target firm is Rentworks Africa (Pty) Ltd and the acquiring firm is FirstRand
Investment Holdings (Pty) Ltd.
3] Rentworks is a subsidiary of The Rentworks Partnership which consists of
Rentworks Trust South Africa, a Mauritian discretionary trust, and Shanduka Rental
Solutions (Pty) Ltd, a 100% subsidiary of Shanduka Fund Managers (Pty) Ltd. 1 The
Shanduka Group is a black owned entity.
4] Firstrand Investment is listed on the JSE and is controlled by FirstRand Limited.
FirstRand Limited also controls various subsidiaries.
5] In terms of this transaction FirstRand Investment will acquire 65% of the shares in
Rentworks. However, in order for the transaction to proceed, the Rentworks
partnership must first be dissolved and its assets restructured. At the conclusion of
the restructuring Rentworks Trust South Africa will no longer hold an interest in
Rentworks and Firstrand Investment will own 65%, Rentworks Trust South Africa
9.9% and Shanduka Rental Solution 25.1% of the shares in Rentworks.
Rationale for the transaction
6] The senior partner representing Rentworks in The Rentworks partnership wishes to
retire and dispose of his interest in the partnership. Shanduka declined the offer to
acquire Rentwork’s share in the partnership.
7] FirstRand wishes to enter the “pay for use” business in which Rentworks trades.
Effect on Competition
8] Rentworks is a rentor of movable assets such as IT equipment, office equipment
and furniture as well as vehicles. It generates revenue from investing in the residual
values of the rented equipment. FirstRand provides a variety of banking services.
However, for purposes of this transaction, we will only consider services rendered
by Wesbank, a division of FirstRand that primarily provides financing for movable
assets via instalment credit and lease agreements.
1Shanduka Rental Solutions has a 50.1% partnership interest and paid R50 million as a
partnership contribution. Rentworks Trust Sout Africa contributed shares in Rentworks and
DFinancial Services (Pty) Ltd to the Partnership for which it received a 49.9% interest.
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9] There is no horizontal overlap in the services supplied by the merging parties as
Wesbank does not invest in the residual value of assets. However the proposed
transaction does constitute a vertical merger. Not only does Wesbank discount 39%
of Rentwork’s rental book for IT equipment, the FirstRand Group also rents certain
of its IT equipment from Rentworks.
10] During its merger investigation competitors and customers of Rentworks indicated
to the Commission that they were concerned about this transaction because it
would result in input foreclosure and sharing of rivals’ information via Wesbank.
However, we do not agree with these concerns.
11] There are numerous players in the market that compete with Wesbank for
discounting rental agreements, such as Standard Bank, ABSA, Nedbank, Fintech
and Sasfin. 2 In fact the competitors that raised these concerns are already
discounting some of their rental agreements with other institutions such as
Standard Bank, ABSA and Nedbank. Input foreclosure is thus unlikely.
12] If customers are concerned that their confidential information might be leaked to
Rentworks via Wesbank they could either move their business to Wesbank’s
competitors or they could lodge a complaint in terms of the Financial Advisory and
Intermediary Services Act that requires financial institutes to keep their customers
information confidential.
13] In light of the above we find that the transaction is unlikely to substantially
lessen or prevent competition in the relevant vertical markets.
Public interest issues
14] The parties submit that the proposed transaction will not result in any job
losses. No other significant public interest issues are raised.
2 The Commission’s investigation revealed that traditionally the market for discounting of IT
rental agreements used to be dominated by ABSA and Standard Bank until Wesbank
established a dedicated unit focusing on this market about 4 years ago.
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D Lewis
Tribunal Member
N Manoim and Y Carrim concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: Hofmeyer Herbstein & Ginwala Inc
For the Commission: M Mohlala and N Mateane
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