COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 94/LM/Dec09
In the matter between:
FirstRand Ltd Acquiring Firm
And
Makalani Holdings Ltd Target Firm
Panel : Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 10/02/2010
Order issued on : 10/02/2010
Reasons issued on : 12/03/2010
Reasons for Decision
APPROVAL
[1] On 10 February 2010 the Competition Tribunal unconditionally approved the
merger between FirstRand Ltd and Makalani Holdings Ltd. The reasons
follow below.
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THE TRANSACTION
[2] This transaction entails FirstRand increasing its shareholding in and acquiring
sole control over Makalani. Pursuant to this, Makalani will delist from the JSE
Ltd.
THE RATIONALE
[3] According to the parties, Makalani is not suited for the listed environment. In
this regard, the parties submitted that Makalani shares have consistently
traded at a discount to its net asset value as a result of various factors such
as the complexity associated with determining the value of its underlying
investment portfolio and mezzanine funding). Makalani therefore approached
FirstRand to assist it in developing a mechanism to maximise the inherent
value of its portfolio.
[4] Both merging parties believe that the business of Makalani is better placed in
an unlisted environment with unitholders who understand the business, the
nature of the underlying investment portfolio and have an investment horizon
aligned to that of the business.
THE PARTIES AND THEIR ACTIVITIES
[5] The primary acquiring firm is FirstRand Ltd (“FirstRand”), a company listed on
the JSE Ltd. FirstRand has a number of subsidiaries including the following1:
• Momentum Group Ltd;
• FirstRand Bank Holdings;
• FirstRand Investment Holdings Ltd;
• FirstRand Bank Ltd; and
• FirstRand International.
[6] FirstRand Group is active in the financial services market which includes retail
banking, short term insurance, assets management, corporate finance,
interest rate management, project finance, risk management, mortgage
1 See exhibit 3 for a list of FirstRand Group of Companies.
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lending as well as other banking solutions. FirstRand’s customers include big
corporate such as [ ].
[7] The primary target firm is Makalani Holdings Ltd (“Makalani”). Makalani is
also listed on the JSE and its major unitholders as follows:
• FirstRand Bank Ltd;
• RMB Asset Management;
• Makalani Treasury;
• Public Investment Corporation;
• ABSA Stockholders;
• Liberty Life; and
• Golden Hint Partnership
[8] Makalani is involved in the provision of commercial advances, focusing
primarily on mezzanine financing. 2 According to the parties, the customer
base of Makalani is primarily made up of BEE transactions, targeted at
investments such in infrastructure and affordable housing.
THE RELEVANT MARKET AND THE IMPACT ON COMPETITION
[9] The activities of the merging parties overlap in respect of the provision of
commercial advances. According to the merging parties, these include private
sector loans, commercial mortgages, commercial overdrafts, preference
shares, public sector loans, factoring and commercial credit cards. The
parties further submitted that the market for the provision of commercial
advances may be broadly or narrowly delineated. The broader market would
include equity instruments such as funding through equity stakes in
companies and the narrower market would include each type of funding
provided by defining several sub-markets such as the market for the provision
of private sector loans, commercial mortgage etc.
[10] The Commission, however, decided that it is not crucial to look at the market
broadly or narrowly given that the transaction is unlikely to result in any
2 Mezzanine financing is described as a debt capital that gives the lender the right to convert
into an ownership or equity interest in the company if the loan is not paid back in time and in
full.
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prevention or lessening of competition in any defined market. The
Commission therefore defined the relevant market as the national market for
the provision of commercial advances.
[11] The merging parties’ combined post-merger market share is approximately
16%. The merging parties compete with other firms such as Standard Bank
(24%), Nedbank (22%), ABSA (20%) and Investec (10%). This transaction is
therefore unlikely to result in any substantial prevention or lessening of
competition in the commercial advances market given that the merging
parties’ post-merger market share remains low and there are other credible
competitors in the market.
CONCLUSION
[12] There are no significant public interest issues and we accordingly approve the
transaction.
__________
____________________ 12/03/2010
Norman Manoim DATE
Concurring: Yasmin Carrim and Andreas Wessels
Tribunal Researcher: I Selaledi
For the merging parties: Edward Nathan Sonnenbergs Inc
For the Commission: E Ramohlola
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