COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 44/LM/Apr08
In the matter between
Reunert Ltd Primary Acquiring firm
And
Quince Capital Holdings Ltd Primary Target Firm
Panel : N Manoim (Tribunal member); Y Carrim (Tribunal member) and M
Mokuena (Tribunal member)
Heard on : 11 June 2008
Decided on : 11 June 2008
Reasons Issued : 09 July 2008
Reasons for decision
Approval
[1] On 11 June 2008 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Reunert Ltd and Quince Capital Holdings Ltd unconditionally.
The reasons for the approval appear below.
Parties
[2] The primary acquiring firm is Reunert Ltd (“Reunert”), a public company listed on the
JSE. Reunert is not controlled by any single shareholder. Its major shareholders are Old
Mutual Asset Managers (SA) with 12.3% and Public investment Corporation with 11.3%
shareholding. Reunert has in excess of twenty subsidiaries in South Africa.
[3] The primary target firm is Quince Capital Holdings Ltd (“Quince Capital”), a company
incorporated under the laws of the Republic of South Africa. Quince Capital is not controlled
by any single shareholder. Its shareholders are Reunert (the primary acquiring firm in the
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instant transaction) with 47.2%, PSG Financial Services Ltd with 40.3% and Kalander Trust
with 6.1%.
Transaction
[4] The parties submit that Quince Capital was established as a joint venture by Reunert,
PSG Financial and the Kalander Trust with the intention of converting it into a bank over
time. However, due to the subprime crisis (which has the potential to greatly increase the
cost of funding to Quince Capital), other alternative ways of financing the business were
explored. The parties therefore decided that it would be best to unwind their investment in
Quince Capital (by means of two related but separate transactions) and restore themselves
to their original position.
[5] In this transaction, which represents the first unwinding process, Reunert will acquire
the remaining 52.8% shares in Quince Capital from PSG Financial Services and the
Kalander Trust. On completion, Reunert will own the entire issued share capital of Quince
Capital.1
Rationale
[6] Due to the potential risk of an increase in the cost of funding Quince Capital as a joint
venture, Reunert, PSG Financial and the Kalander Trust decided that it would be best to
unwind their investment in Quince Capital and restore themselves to their original position.
[7] The rationale for Quince Capital is that it will restore all shareholders to their
respective position as it was before the conclusion of the joint venture.
Parties Activities
Reunert
[8] Reunert is an investment holding company with interests in the following sectors:
Electrical engineering, office systems, consumer products, telecommunication, electronic
and defence systems and investments and services. For purposes of the present
transaction, activities of Reunert’s two subsidiaries, i.e. Nashua Office Systems and
1 The second unwinding process entails PSG Financial Services and the Kalander Trust
1 The second unwinding process entails PSG Financial Services and the Kalander Trust
repurchasing the assets which they initially contributed to Quince Capital. This
transaction is dealt with separately under case no: 45/LM/Apr08.
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Pansolutions, are relevant.
[9] Nashua Office Systems is a supplier of office multifunctional devices branded
“Nashua”. It sources its products from Ricoh, a manufacturer of office automation
equipment. Pansolutions is also a supplier of office multifunctional devices to corporate
clients. It distributes “Panasonic” branded products.
Quince Capital
[10] Quince Capital is an initiative that was established by Reunert, PSG Financial and
the Kalander Trust. Its subsidiary, i.e. RC&C Finance 2, is an asset backed finance company
trading as Nashua Finance 3 and Quince Asset rental. RC&C Finance provides financing by
way of rental agreements predominantly in respect of Nashua and Panasonic products to
end consumers and franchisees. It discounts rental agreements concluded between
franchisees and end consumers.
[11] The rental agreements provided by RC&C Finance are in respect of office
automation equipment which includes photocopiers, printers, fax machines,
telecommunication equipment, computers, IT equipment and software, audio visual
equipment etc.
Competitive analyses
[12] There is no overlap between the activities of the merging parties as Reunert is a
supplier of office multifunctional devices and Quince Capital discounts rental agreements in
respect of office automation equipment. The proposed transaction, however, results in a
vertical integration as Reunert is a supplier of office automation equipment (upstream
market) and Quince Capital discounts office automation equipment (downstream market).
The Commission defined the geographic market as national in both affected markets
because customers can source office equipment and/or the financing thereof from anywhere
in the country.
[13] Although the majority of RC&C Finance’s turnover is derived from offering
discounting services to Reunert, the Commission found that the transaction would not result
discounting services to Reunert, the Commission found that the transaction would not result
in input foreclosure as RC&C Finance is not the only major player in the market for
discounting of office automation equipment. There are other players such as Sasfin, Fintech,
Absa Technology Finance and Technofin who will serve as an alternative in the unlikely
2 RC&C Finance was a subsidiary of Reunert until 2007 when it was transferred to Quince Capital.
3 It is submitted that Nashua Finance is not part of the Nashua Group.
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event of RC&C Finance deciding not to discount agreements from other suppliers of office
automation equipment.
[14] Similarly, the transaction is unlikely to give rise to customer foreclosure as Reunert is
not the only major customer in the market for discounting services for office automation
equipment. There are other customers such as Xerox, Minolta, Mita/Kyocera and Sharp
which other discounting firms can serve. Further, the parties submit that they do not have
any exclusive arrangement and none will be entered into post merger. We therefore agree
with the Commission that proposed transaction is unlikely to substantially prevent or lessen
competition in the affected markets.
Public interest
[15] The transaction does not give rise to any public interest issues and is accordingly
approved without conditions.
___________________ 09 July 2008
N Manoim Date
Tribunal Member
Concurring: Y Carrim and M Mokuena
Tribunal Researcher : I Selaledi
For the merging parties : Edward Nathan Sonnenbergs Inc
For the Commission : Makgale Mohlala and Linda Chung
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