COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 53/LM/May08
In the matter between
Purple Moss 25 (Pty) Ltd Primary Acquiring firm
And
FI Funding and Investments Holdco (Pty) Ltd Primary Target Firm
Panel : D Lewis (Tribunal member); N Manoim (Tribunal member) and
U Bhoola (Tribunal member)
Heard on : 09 July 2008
Decided on : 09 July 2008
Reasons Issued : 18 September 2008
Reasons for decision
Approval
[1] On 09 July 2008 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Purple Moss 25 (Pty) Ltd and FI Funding
and Investments Holdco (Pty) Ltd unconditionally. The reasons for the approval
appear below.
Parties
[2] The primary acquiring firm is Purple Moss 25 (Pty) Ltd (“Purple Moss”), a
special purpose vehicle established for the purposes of this transaction. The parties
submit that Purple Moss’s sole purpose is the winding down of the structured finance
activities conducted by the primary target firm, i.e. FI Funding and its subsidiaries.
[3] Purple Moss will be controlled by a trust to be formed in the Republic of
South Africa. The Trustees and beneficiaries of the trust will be individuals who are
1
currently involved in the management of the FI Funding group of companies. 1 The
trust will not directly or indirectly own or control any other firms. Purple Moss does
not directly or indirectly control any other firm.
[4] The primary target firm is FI Funding and Investments Holdco (Pty) Ltd (“FI
Funding”).2 FI Funding is a wholly owned subsidiary of Merilyn Investments (Pty) Ltd
(“Merilyn”), which is in turn owned and controlled by Hosken Consolidated
Investments Ltd (“HCI”). HCI is a public company listed on the Johannesburg
Securities Exchange. FI Funding controls a number of subsidiaries.3
Transaction
[5] The parties submit that the proposed transaction constitutes a management
buy-out and is also conditional upon a related proposed transaction. 4 In terms of this
transaction, Purple Moss intends to acquire the entire issued share capital of FI
Funding from Merilyn. Post-merger, Purple Moss will have sole control over FI
Funding and all its subsidiaries.
Rationale
[6] According to the parties, this management buy-out is to facilitate the winding
down of the existing book of FI Funding. From FI Funding’s perspective the rationale
for the transaction is that it is no longer viable to continue with the structured finance
activities due to the recent changes to financing markets in South Africa, hence the
decision to wind down its (FI Funding) existing book.
Parties Activities
[7] Purple Moss is a special purpose vehicle which has not previously traded.
The parties submit that it was established for the sole purpose of winding down the
structured finance activities previously conducted by FI Funding and its subsidiaries.
1 It is submitted that the trustees will be Friedrich Hans Esterhuyse and Karen Louise Nordier and
beneficiaries will be Friedrich Hans Esterhuyse (through the AS Trust, IT No: 3798/2007), Hendrik
Frederik Prinsloo, Christiaan Gerrit Du Toit (through the Die Melandre Trust, IT No: 955/2005), Karen
Louise Nordier and Harry Wesley May.2 FI Funding was previously known as Mettle Ltd.3 That is 107 firms in South Africa, 13 foreign firms and 12 trusts.4 The Georgia Avenue transaction, under case no: 52/LM/May08.
2
Purple Moss does not currently provide any products or services in, into or from the
Republic of South Africa.
[8] The parties submit that FI Funding and its subsidiaries were active in the
structured finance 5 market until 2005. As the structured finance business was no
longer viable, a strategic decision was taken not to continue with it and to wind down
the existing book of FI Funding following legislative changes in the structured finance
environment.
[9] The parties further submit that FI Funding and its subsidiaries are currently
attending to the needs of their existing clients by managing and unwinding a number
of historical financing structures. However, FI Funding and its subsidiaries do not
offer any new services to clients or engage in any new business.
Competition analyses
[10] There is no overlap between the activities of the merging parties as the
acquiring firm is an SPV and has not previously traded. In addition, apart from
attending to the needs of existing clients by managing and unwinding a number of
historical financing structures, FI and its subsidiaries no longer offer any new
services or engage in any new business in the structured finance market.
Public interest
[11] The transaction does not give rise to any public interest issues and is
approved without conditions.
_______________ 18 September 2008
D Lewis Date
Tribunal Member
Concurring: N Manoim and U Bhoola
5 The parties state that structured finance is a broad term used to describe a sector of finance that
was originally created in order to help transfer risk to customers using complex legal and corporate
entities.
3
Tribunal Researcher : I Selaledi
For the merging parties : Deneys Reitz Attorneys
For the Commission : Thabelo Masithulela (Mergers & Acquisitions)
4