COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 119/LM/Nov07
In the matter between:
Fluxrab Investments No. 159 (Pty) Ltd Acquiring Firm
And
Gold Reef Resorts Limited Target Firm
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal
Member) and M Mokuena (Tribunal Member)
Heard on : 19 December 2007
Order Issued : 19 December 2007
Reasons Issued: 19 December 2007
Reasons for Decision
Approval
1] On 19 December 2007, the Tribunal unconditionally approved the merger between
Fluxrab Investments No. 159 (Pty) Ltd and Gold Reef Resorts Limited. The reasons
for approving the transaction follow.
The parties
2] The primary acquiring firms are Fluxrab Investments No. 159 (Pty) Ltd (“PurchaseCo”)
and Fluxrab Investments No. 158 (Pty) Ltd (“NewOpco”) (collectively “the primary
acquiring firm”). PurchaseCo and NewOpco are companies incorporated under the
laws of the Republic of South Africa.
3] NewOpco is a wholly owned subsidiary of PurchaseCo. In turn, PurchaseCo is wholly
owned by Fluxrab 160 (Pty) Ltd (“HoldCo”) Holdco is not controlled by any single firm.
The shareholders of HoldCo are Ethos Fund V (with 15.5% shareholding),
W2005/W2007 Amelia Asset 4 BV (“DutchCo”) (with 42%), BEE shareholders (with
30% shareholding) 1, and Management Gold Reef Resorts (with 12.5%) shareholding).
4] NewOpco, PurchaseCo, and HoldCo are all shelf companies incorporated for the
purposes of the proposed transaction. They have not earned any turnover and they do
not have any assets premerger.
5] The primary target firm is Gold Reef Resorts Limited (“Gold Reef”), a public company
listed on the JSE Securities Exchange. Gold Reef is not controlled by any single
shareholder and its major shareholders are Casino Australia (with 20.78%
shareholding), The Maxim krok 1994 Trust (with a 5.38% shareholding), The Elana
Pincus 1994 Trust (with 4.10% shareholding), The Shelley krok 1994 Trust (with a
4.10% shareholding), The Simon Lerman 1994 Trust (with a 4% shareholding), The
David krok 1994 Trust (with 3.61%), and Mark Krok (with 3.18%).
Description of the transaction
6] In terms of this transaction, 2 PurchaseCo intends to acquire all of the issued and to
beissued share capital (other than the excluded shares), of Gold Reef from the
current shareholders (other than the excluded shareholder), 3 and the listing of Gold
Reef on the JSE Securities Exchange will be terminated. Thereafter, Gold Reef will be
restructured, such that NewOpco will acquire certain shares and businesses from
Gold Reef.
Rationale for the transaction
1 See page 70 of the record for a complete list of the BEE shareholders.
2 The transaction will be done through a scheme of arrangement in terms of section 311 of the
Companies Act, 1973, as amended between Gold Reef and the shareholders of Gold Reef (other
than the excluded shareholder).
3The excluded shares are the treasury shares held by Aldiss Investments (Pty) Ltd, which is the
“excluded shareholder”. See record page 37.
7] HoldCo’s shareholders view an investment in Gold Reef as sound and one that will
provide attractive returns.
8] The shareholders of Gold Reef wish to realise their return on investment.
The Parties’ activities
The primary acquiring firm
9] The primary acquiring firm and HoldCo are investment vehicles through which the
shareholders of HoldCo will acquire an interest in Gold Reef. HoldCo and the primary
acquiring firms have been incorporated for the purposes of this transaction and, as a
result, do not have business activities prior to the implementation of this transaction.
PurchaseCo’s sole business will be to hold shares in Gold Reef. NewOpco has been
incorporated to conduct the business currently conducted by Gold Reef. HoldCo’s
sole business will be to hold shares in the primary acquiring firm.
10] Save for the BEE shareholders’ current interest in Gold Reef and the current
management of Gold Reef’s current interest in Gold Reef, all other shareholders have
no interest in any business which could be regarded as competitors of Gold Reef.
There is therefore no need to analyse the activities of the shareholders of HoldCo.
The primary target firm
11] Gold Reef owns, operates and invests in hotels, casinos, conference facilities and
theme parks in South Africa. Gold Reef operates through: 4
[11.1] A casino, hotel, conference facility and theme park in Ormonde in Gauteng trading as
Gold Reef City;
4 In addition Gold Reef is in the process of developing a casino in the West Rand of Gauteng, which
will trade under the name Silverstar Casino. It is expected that Silverstar will be fully operational in the
first quarter of 2008. This casino will be controlled by Silverstar Development Limited, which is
currently a wholly owned subsidiary of Gold Reef.
[11.2] A casino in Langebaan in the Western Cape trading as Mykonos Casino;
[11.3] A casino, hotel and conference facility in Pietermaritzburg in the Natal Midlands
trading as Golden Horse Casino;
[11.4] A casino in Mossel Bay in the Western Cape trading as Garden Route Casino;
and
[11.5] A casino in Welkom in the Free State trading as Goldfields Casino.
Competition Analysis
12] There is no overlap in the activities of the merging parties. PurchaseCo, NewOpco
and HoldCo are shelf companies incorporated for the purpose of the proposed
transaction, while Gold Reef operates and invests in hotels, casinos, conference
facilities and theme parks. The proposed transaction is therefore unlikely to
substantially prevent or lessen competition as the parties’ combined post merger
market shares remain unchanged.
Public Interest
13] There are no public interest issues.
Conclusion
14] The merger is unlikely to substantially prevent or lessen competition. There are no
public interest issues. Accordingly, the merger is approved unconditionally.
________________ 19 December 2007
D Lewis DATE
Tribunal Member
Y Carrim and M Mokuena concur in the judgment of D Lewis.
Tribunal Researcher : R Kariga
For the merging parties: Edward Nathan Sonnenbergs
For the Commission : M Mashaba and M Mohlala (Mergers and acquisitions)