COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 73/LM/JUL07
In the matter between:
FIRSTRAND BANK LIMITED Acquiring Firm
And
LENDING DIVISION OF THE TRANSNET HOUSING
BUSINESS UNIT Target Firm
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Panel : Y Carrim ((Presiding Member), U Bhoola (Tribunal Member)
and M Madlanga (Tribunal Member)
Heard on : 14 September 2007
Decided on : 14 September 2007
Reasons issued on : 18 September 2007
REASONS FOR DECISION
Approval
[1] On 14 September 2007, The Tribunal approved the acquisition by FirstRand Bank
Limited (“FirstRand Bank”), of the Lending Division of Transnet Housing Business Unit
(“Transnet Housing – Lending Division”), without conditions. The reasons for that
decision follow.
Parties to the Transaction
[2] The primary acquiring firm is FirstRand Bank. FirstRand Bank does not control
any firm. FirstRand Bank is a wholly owned subsidiary of FirstRand Bank Holdings
Limited (“FirstRand Bank Holdings”), which in turn is wholly owned by FirstRand
Limited (“FirstRand”). FirstRand is not controlled by any firm. The acquiring group as a
whole has over thirty subsidiaries. 1
[3] The primary target firm/business is Transnet Housing – Lending Division, a division
of Transnet Limited (“Transnet”). Transnet is wholly owned by the government of the
Republic of South Africa and has in excess of ten business units, 2 primarily involved in
the transport sector.
Transaction
[4] In terms of the Sale of Business Agreement FirstRand Bank is purchasing the
Lending Division of the Transnet Housing Business Unit from Transnet Limited.
Pursuant to the implementation of the transaction FirstRand Bank will acquire
ownership and control of Transnet Housing – Lending Division.
Rationale for the Transaction
[5] The acquiring group submitted that it views Transnet Housing – Lending Division
as an attractive investment as the latter is an established mortgage business. Transnet,
which operates and controls South Africa’s major transport infrastructure and is
responsible for ensuring that the country’s transport industry conforms to international
standards has decided to sell Transnet Housing Lending Division, a noncore division,
in order to focus on logistics.
The parties Activities
1 Details of which appear in pages 36 – 55 of the record.
2 Details of which appear in pages 334 – 337 of the record.
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[6] The acquiring group is an integrated financial services provider. Its products
include retail banking; investment banking; corporate banking; private banking, life
assurance; health insurance; asset management; employee benefits and short term
insurance. FirstRand Bank also provides home loans or mortgage finance
indiscriminately to private individuals nationally. FirstRand Bank also provides banking
services to Transnet.
[7] Transnet Housing – Lending Division administers all housing related activities
within the Transnet Group and offers home loans (mortgage and pension fund backed
loans); general and secured small loans. The target firm provides these services in
house to current and former employees of Transnet.
The Relevant Market
[8] The commission defined the market as being that of the provision of home loans
and, taking into account the nature of the product involved, the commission further
defined the geographic market as national. We accept the commission’s market
definition.
[9] Table 1. below indicates the pre and post merger market structure in the provision
of home loans in South Africa.
Table 1. Pre and post merger home loans market structure in RSA
Competitor Market Share prior
merger
Market Share post
merger
The acquiring
Group
16.3% 16.5%
Transnet Housing –
Lending Division
0.2% 0%
ABSA 30.3% Same
Standard Bank SA 26% Same
Nedbank 19.6% Same
Investec 5.6% Same
Competition Analysis
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[10] The transaction has both horizontal implications (as the parties are competitors in
the home loans business) and vertical implications (as FirstRand Bank also provides
corporate banking services to Transnet). In view of the fact that Transnet only provides
its home loans services to current and former employees, the target firm does not
actively compete against FirstRand Bank in the home loans market. The horizontal
effects of the transaction are also insignificant as the acquiring group’s market share
will only increase by 0.2% from 16.3% to 16.5%. The local home loan market remains a
fiercely contested one and at least three significant competitors i.e. ABSA, Standard
bank and Nedbank, will remain in the market post merger, with higher market shares
than the merged entity.
[11] Accordingly, we find that the transaction will not substantially prevent or lessen
competition.
Conclusion
[12] We further find that the transaction does not raise any significant public interest
issues and accordingly approve the merger without conditions.
_______________ 18 September 2007
Y Carrim Date
U Bhoola and M Madlanga concurring.
Tribunal Researcher : P S Munyai
For the merging parties : Edward Nathan & Sonnenbergs for Transnet
: Hofmyer Herbstein & Ginwala Inc
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for FirstRand Bank.
For the Competition Commission : M Dasarath
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