COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:40/LM/May11
In the matter between:
Mainstreet 872 (Pty) Ltd Acquiring Firm
And
Tracker Investment Holdings (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 24 August 2011
Order issued on : 24 August 2011
Reasons issued on : 12 September 2011
Reasons for Decision
Approval
1] On 24 August 2011 the Competition Tribunal (“Tribunal”) approved the
large merger between Mainstreet 872 (Pty) Ltd (“acquiring firm”) and
Tracker Investment Holdings (Pty) Ltd (“target firm”). The Tribunal’s
reasons for approving the transaction are set out below.
1
The Parties to the transaction
2] The acquiring firm is Mainstreet 872 (Pty) Ltd (“Mainstreet”), a shelf
company created for the purposes of this transaction in order to indirectly
acquire 100% of the assets and businesses of the target firm, Tracker
Investment Holdings (Pty) Ltd (“Tracker”).
3] This transaction involves the exit of one of the shareholders of Tracker,
namely Remgro Limited, and its replacement by Actis LLP (“Actis”). 1 Actis,
which will be treated as the acquiring firm in terms of the proposed
transaction, is a limited liability partnership registered in terms of the laws
of the United Kingdom; it is not listed on any exchange and is not
controlled by a single person or shareholder.
4] Actis controls in excess of 80 portfolio investment firms and its major
shareholders include the United Kingdom Government and EES Trustees
International, a firm which acts as a trustee for the Actis LLP Employee
Benefit Trust and holds its interest in Actis on behalf of Actis employees.
5] The primary target firm is Tracker Investment Holdings (Pty) Ltd
(“Tracker”), an investment holding company which holds interests in the
various subsidiaries which make up the target firms, namely Tracker
Network, Tracker Agility and Tracker Total Relationship Management
(collectively referred to as “Tracker” or “the target firm”).
6] Tracker’s shareholders include Remgro Limited (“Remgro”) 34.44% 2,
Mineworkers Investment Company (Pty) Ltd (“MIC”) 29.44% 3 and
FirstRand Limited (“FirstRand”) 36.11%.4
1 http://www.act.is/
2 Remgro holds its interest in Tracker through a wholly owned subsidiary, Tracker & Signal
Distribution Technologies (Pty) Ltd.
3 MIC holds its interest in Tracker through Erinridge Investments (Pty) Ltd.
4 FirstRand holds its interest in Tracker through its Wesbank Division.
2
Description of Transaction
7] In terms of the proposed transaction, which is essentially a restructuring,
Mainstreet will be indirectly acquiring 100% of the assets and business of
tracker and its subsidiaries. The effect of this transaction is that:
a. Remgro will exit as a shareholder and be replaced by Actis;
b. Wesbank’s share interest will reduce to 23% and further be
transferred to RMB Ventures 6 (RMBV6), a partially owned
subsidiary of Rand Merchant Bank (“RMB”), and to RMB;
c. Of the decreased Wesbank share capital, 7% will be transferred to
Tracker Management and the remaining 6.11% to Actis; and
d. Tracker will liquidated and Mainstreet will take over its business as
a going concern.
8] The post transaction shareholding structure in Mainstreet will be as
follows: Actis (40%); MIC (30%); RMBV6 (13%); RMB (10%) and Tracker
Management (7%).
The activities of the parties
9] Actis provides a variety of funding solutions for companies internationally
such as capital buyout and growth transactions, typically with a minimum
investment size of $50 million. Actis focuses on infrastructure businesses
in emerging markets particularly within the power and transport sectors.
10]Locally, Actis has a minority share interest in Alexander Forbes’s short
term insurance division as well as a minority share interest in the RTT
Group (“RTT”) and can accordingly be said to provide short term insurance
and logistics services respectively in the Republic of South Africa.
3
11]Tracker’s core business relates to three principal activities being (i) the
supply of stolen vehicle recovery services (“SVR”); (ii) fleet monitoring; and
(iii) telematics services.
12]SVR involves the reactive recovery of vehicles that have been stolen and
is essentially a security service rendered to companies and private
individuals. Fleet monitoring services involve GPS-based products which
monitor vehicle movement on an on-going basis for fleet owners.
Telematics services are a new development which combines receiving
measurements via GPS communicated through GSM as data (telemetry)
and the interpretation and distribution of such information (informatics)
used in fleet management for the consumer and commercial market.
The Rationale
13]Actis sees this transaction as means of investing in a firm which is active
in a rapidly growing sector of the South African economy.
14]This transaction is a restructuring for FirstRand in that its interests in
Tracker will now be held by RMBV6 and RMB and it’s also reducing its
equity exposure from 36.1% to 23%.
15]MIC’s interest in Tracker will be restructured while Remgro has opted to
exit and realise its investment in Tracker.
The relevant market and the impact on competition
16]Actis currently has no interest in any SVR company in South Africa, but
makes use of tracking devices through its shareholding in RTT (fleet
management) and in Alexander Forbes (insurance). The Commission
found that the provision of SVR products is linked to both the provision of
short term vehicle insurance and the ownership of fleets, but concluded
4
that even though the above services are interlinked, they exist
independently of each other and may further be complementary to each
other, but are not competing products / services.
17]The Commission further concluded that the proposed transaction does not
raise the existing barriers to entry in this market due to it resembling an
internal restructuring.
18]Four main concerns were raised by competitors over the proposed
transaction:
a. The first concern related to FirstRand’s historic interest in
Outsurance and Momentum and the possible existence of exclusive
agreements between Tracker and the above insurers. The parties
indicated that no agreements of such a nature are in existence and
further deposed to an affidavit to that effect.
b. The second concern was over the South African Police Service’s
(“SAPS”) granting and subsequent renewal of an exclusive contract
with Tracker for the supply of SVR devices to their vehicles to the
exclusion of competitors. This concern is not merger specific. The
relationship existed prior to the merger and nothing in the merger
makes the relationship more likely in the future than it would be
without the merger.
c. Thirdly, Actis may use its 12.2% shareholding in Alexander Forbes
to exclude Tracker competitors from being customers of Alexander
Forbes. The parties’ response to this was that the shareholding
does not give Actis control over Alexander Forbes and also that
Alexander Forbes has a market share of only 1.7% (FSB
Statistics).5
d. Finally, Should Actis acquire an interest in any other insurance
5 Alexander Forbes therefore does not have the requisite market power to engage in a
foreclosure strategy in this market.
5
companies; it will exclude competitors of Tracker as suppliers of
SVR services to those companies. This concern can be dealt with
at the relevant time and does not follow from the present
transaction.
19]The Commission could not find evidence of the concerns raised being
merger specific and also concluded that there is little incentive and ability
for Actis to engage in a foreclosure strategy.
20]The proposed transaction does not significantly alter the structure of the
market nor does it increase Tracker’s market share and the Commission
accordingly finds that the proposed transaction is unlikely to substantially
prevent or lessen competition.
Public Interest
21]The merging parties submitted that the proposed transaction does not
raise any significant public interest concerns and has no adverse effect on
employment.
Conclusion
22]In light of the above factors and the Commission’s analysis, the Tribunal
concludes that the proposed transaction is unlikely to substantially prevent
or lessen competition.
23]Accordingly, the above merger is approved without conditions.
6
____________________ 12 September 2011
N Manoim Date
Y Carrim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Robert Wilson and Shawn Van Der Meulen of
Webber Wentzel Attorneys
For the Commission: Lebohang Molefe
7