COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 132/LM/Dec08
In the matter between:
Ukhamba Holdings (Pty) Ltd Acquiring Firm
and
Pragma Africa (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal
Member) and N Manoim (Tribunal Member)
Heard on : 04 February 2009
Order issued on : 04 February 2009
Reasons issued on : 27 February 2009
Reasons for Decision
Introduction
[1] On 4 February 2009 the Tribunal approved the acquisition by Ukhamba
Holdings (Pty) Ltd of the entire issued share capital in Pragma Africa (Pty)
Ltd. The reasons follow below.
The transaction and parties
[2] The parties signed a Subscription Agreement whereby:
i. Ukhamba Holdings (Pty) Ltd (“Ukhamba”) will subscribe to 2857
issued ordinary shares in the capital of Pragma Holdings,
constituting 28.57% of the issued share capital of Pragma
Holdings;
ii. Ukhamba will subscribe to 300 issued ordinary shares in the
capital of Pragma Africa (“Pragma Africa”), constituting 30% of the
issued share capital of Pragma Africa;
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iii. Ukhamba acquires 50% of the loan due by Pragma Africa to
Pragma Africa SA.
[3] The transaction constitutes a change in control. Although Ukhamba will
directly hold 30% of the shares in Pragma Africa and Pragma Africa Holdings
70% post the merger, indirectly Ukhamba will hold 58% of the shares in
Pragma Africa, via its 28.57% shareholding in Pragma Africa Holdings. Both
shareholders, Ukhamba and Pragma Africa Holdings, are entitled to each
appoint four directors to the Board of Pragma Africa which will each, including
the chairman, represent one vote.
[4] Ukhamba is jointly controlled by Imperial Holdings Ltd and Ukhamba Trust.
Both Imperial and Ukhamba controls a number of subsidiaries.
Rationale for the transaction
[5] According to Ukhamba there are existing synergies between the companies
within the acquiring and target firms’ groups which will benefit both firms.
Ukhamba also recognizes Pragma Africa as an attractive investment
opportunity while the target company wishes to join a BEE entity in order to
increase its business opportunities.
Effect on Competition
[6] Ukhamba is an investment vehicle established by the Imperial Group to focus
on making medium to long term equity investments in established businesses
which require broad based Black Economic Empowerment partners. Imperial
is a diversified multinational services and retail group with activities spanning
logistics, car rental and vehicle retailing.
[7] Pragma Africa provides physical asset management services to a wide range
of industrial, mining, local authorities and healthcare clients. The services
include optimising the performance of physical assets of clients by way of a
complete asset management solution throughout the life of the asset in order
for clients to maximise their return on assets.
[8] The Commission found that t here is no horizontal overlap in the services
offered by the merging parties. It also considered whether the transaction
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raised any vertical concerns in light of the acquiring firm’s rationale for the
transaction namely that certain synergies arose from the merger. It was found
that the transaction is unlikely to raise any competition concerns as the
merging parties have a relative small market share, below 14%, in a highly
populated asset management market.1 Foreclosure is therefore unlikely.
[9] In light of the above the Tribunal finds that the proposed transaction is
unlikely to substantially prevent or lessen competition.
PUBLIC INTEREST
[10] The transaction does not raise any significant public interest concerns.
___________________ 4 March 2009
N Manoim Date
D Lewis and Y Carrim concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: The merging parties represented themselves
For the Commission: Mfundo Ngobese
1 The merging parties estimated the merged entities market share as 14.5% having only
regard to the five largest players in the asset management services market. There are
however numerous players competing in this market.
3