COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 36/LM/Jul10
In the matter between:
FirstRand Ltd Acquiring Firm
And
Barnard Jacobs Mellet Holdings Ltd Target Firm
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 19 August 2010
Order issued on : 19 August 2010
Reasons issued on : 15 October 2010
Reasons for Decision
Approval
1] On 19 August 2010, the Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition of Barnard Jacobs Mellet
Holdings Ltd by FirstRand Ltd. The reasons for approving the
transaction follow.
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The merging parties and their activities
2] The primary acquiring firm is FirstRand Ltd (“FirstRand”), a public
company incorporated under the company laws of the Republic of
South Africa and listed on the JSE. No single shareholder controls it.
FirstRand has a number of subsidiaries, including FirstRand
Investment Holdings Limited, Momentum Group Limited and
FirstRand Bank Holdings. 1 Collectively these firms will be referred to
as the FirstRand Group.
3] The FirstRand Group is active in the financial services market which
includes retail banking, short-term insurance broking,
assets/investment management, private client’s management,
corporate finance, interest rate management, project finance, risk
management, mortgage lending as well as other banking solutions.
4] As stated in paragraph above, the business of the FirstRand Group
has been divided into two entities viz. FirstRand Bank and
Momentum Group. For the present purposes, the FNB Wealth cluster
is relevant. FirstRand provides high net worth private client wealth
management through RMB Private Bank and FNB Private Clients.
5] The primary target firm is Barnard Jacobs Mellet Holdings Ltd
(“BJM”), a public company incorporated under the company laws of
the Republic of South Africa and listed on the JSE. BJM directly or
indirectly controls eleven entities.2
6] BJM’s activities include private wealth management and stock
brokering services ; research, research sales and sales trading
services to institutional investors in Europe and North America;
1 The FirstRand Banking Group has First National Bank (“FNB”), Rand Merchant Bank (“RMB”) and
WesBank as its operating businesses.
2 See pages 39 and 40 of the record for further details.
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corporate finance and corporate advisory services; and settlement,
administration and script lending services.
The proposed transaction
7] In terms of the proposed transaction FirstRand will acquire the entire
issued share capital of BJM. The proposed transaction therefore
results in FirstRand gaining sole control of BJM.
Services overlap and impact on competition
8] In line with previous Tribunal decisions 3 we find that the activities of
the merging parties overlap at a national level in the following service
areas:
i) stock broking;4
ii) short-term insurance broking;5
iii) asset/investment management6; and
iv) corporate finance.7
3 For stock broking services: see, for example, the Tribunal’s decision in the large merger involving
PSG Konsult Ltd and Tlotlisa Securities (Pty) Ltd (Tribunal case no. 28/LM/Feb08), at paragraph 6.
For short-term insurance broking services: see, for example, the Tribunal’s decision in the large merger
involving Prestasi Brokers (Pty) Ltd and Thebe Risk Services (Pty) Ltd (Tribunal case no.
27/LM/Apr06), at paragraph 11. For corporate finance: see, for example, the Tribunal’s decision in the
large merger involving JP Morgan Securities South Africa (Pty) Ltd and Cazenove South Africa (Pty)
Ltd (Tribunal case no. 96/LM/Nov04).
4 The merging parties on page 76 of the record define a stockbroker as a regulated professional broker
who buys and sells shares and other securities through market makers or Agency Only Firms on behalf
of investors.
5 This refers to the sale of short term insurance products on behalf of short-term insurers to both
corporate entities and individuals. Both the merging parties facilitate the offering of short-term
insurance products/services to high net worth individuals who utilise their stock broking and/or asset
management services.
6 These are services provided by financial institutions that invest or supply other premium financial
services for their high net worth clients, for example wealth management, investment portfolio
services for their high net worth clients, for example wealth management, investment portfolio
management and structured lending.
7 This includes a range of specialist services to corporate clients and includes both capital raising
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9] In all potential relevant markets the estimated post merger national
market share of the merged entity will not exceed 15%. Furthermore,
there is significant competition from a number of other financial
services companies in all these overlapping areas. We therefore find
that the proposed deal is unlikely to substantially prevent or lessen
competition in any relevant market.
Public interest issues
10] The Competition Commission at the hearing of this matter indicated
that no more than 10% of the 194 employees 8 of BJM would
potentially be retrenched as a result of this merger. Furthermore, the
Commission found that these affected employees are skilled
individuals and are therefore mobile.9
11] Counsel for the merging parties at the hearing confirmed that the
merging parties envisage retrenchments of no more than 10% of
BJM’s current workforce.10 Counsel further indicated that “every effort
will be made to place those people within the FirstRand group if it’s
possible to do so ” and that the affected employees are “ semi-skilled
and skilled employees mainly in the Human Resources, Financial
and Administration services part of the business”.
12] Employee representatives and the trade union SASBO were notified
of the merger. Counsel for the merging parties indicated that there
has been a series of consultations with the relevant employees as a
result of the integration planning for the merger and that they have
had access to the non-confidential version of the merger forms and
the merger report. SASBO confirmed that it has no objection to the
proposed merger “ subject to the parties complying with section 189
(equity and bond finance) and the provision of advice.
8 The operational due diligence report however states that the total headcount of BJM as at 31 May
2010 is 206 employees (see page 780 of the record).
9 See page 12 of the Commission’s report dated 10 August 2010.
9 See page 12 of the Commission’s report dated 10 August 2010.
10 Also see page 5 of the record where the merging parties confirm this worst-case scenario.
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of the Labour Relations Act, 66 of 1995 (as amended)”.11
13] Based on the very limited maximum number of potential
retrenchments and the skills level of said limited number of affected
employees, we find that no significant public interest concerns arise
from this merger.
Conclusion
14] Due to the post merger relatively low market shares of the merged
entity and the presence of a number of competitors in all the affected
markets, the proposed transaction is unlikely to substantially prevent
or lessen competition in any market. Furthermore, no significant
public interest issues arise from the proposed deal. We accordingly
approve the proposed transaction unconditionally.
____________________ 15 October 2010
Andreas Wessels DATE
Andiswa Ndoni and Medi Mokuena concurring
Tribunal Researcher : Mahashane Shabangu
For the merging parties : Deneys Reitz Attorneys
For the Commission : Mogalane Matsimela of the Mergers
11 See SASBO letter of 07 July 2010 addressed to the Competition Commission.
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&
Acquisitions Division
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