COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 66/LM/Jun12
In the matter between:
Momentum Group Limited Acquiring Firm
And
Momentum Short-Term Insurance Company Limited Target Firm
Panel : Yasmin Carrim (Presiding Member)
Andreas Wessels (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 31 July 2012
Order issued : 31 July 2012
Reasons issued on : 03 September 2012
Reasons for Decision
Approval
1] On 31 July 2012 the Competition Tribunal (“Tribunal”) unconditionally
approved the proposed merger between Momentum Group Limited and
Momentum Short-Term Insurance Company Limited. The reasons for
approval of the proposed merger follow below.
Parties to transaction
2] The primary acquiring firm is Momentum Group Limited (“Momentum”),
a company incorporated under the company laws of the Republic of
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South Africa. Momentum is controlled by MMI Holdings Limited (“MMI
Holdings”), a public company listed on the JSE Securities Exchange.
3] The primary target firm is Momentum Short-Term Insurance Company
Limited (“MSTI”), a company incorporated under the company laws of
the Republic of South Africa. Pre-merger MSTI is jointly owned and
controlled by Momentum (50%) and OUTsurance Holdings Limited
(“OUTsurance”) (50%). MSTI does not control any firms.
4] The core business activities of the MMI Holdings Group are long-term
insurance, asset management, savings, investment, health-care
administration and employee benefits. It also provides short-term
insurance through the above-mentioned joint venture with
OUTsurance, i.e. MSTI.
5] MSTI is part of the Momentum Retail business unit. It markets and sells
short-term insurance products (specifically motor, household and
business insurance) through independent brokers and agents.
Proposed transaction and rationale
6] Momentum already owns 50% of the issued share capital of MSTI. In
terms of the proposed transaction Momentum intends to acquire the
remaining 50% of the issued share capital of MSTI from OUTsurance.
7] Momentum submitted that the acquisition of MSTI will inter alia create
the necessary intellectual property, skills and capacity within MMI
Holdings to leverage during future opportunities that could present itself
in the short-term insurance industry both locally and internationally.
8] In terms of MSTI’s perspective, the current shareholding structure is
not optimal for its success. OUTsurance would therefore prefer to sell
its stake in MSTI, as the business strategy and marketing positioning of
MSTI is better aligned with that of MMI Holdings.
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Relevant market(s) and impact on competition
9] There is an overlap in the activities of the merging parties in respect of
the provision of the short-term insurance. According to the merging
parties, if narrower short-term insurance segments are considered,
their activities only overlap with regards to the segments (i) property;
and (ii) liability. The merged entity’s post-merger national market share
in the broad market for the provision of short-term insurance, as well as
in each of the narrower segments, will be less than 5%. Competitors in
the market for short-term insurance include Santam, Mutual & Federal,
Hollard, OUTsurance and Zurich. The proposed transaction is therefore
unlikely to substantially prevent or lessen competition in any relevant
market.
Public interest
10]The merging parties confirmed that the proposed transaction will have
no adverse effects on employment in South Africa. 1 The proposed deal
raises no other public interest concerns.
CONCLUSION
11]We approve the proposed transaction unconditionally.
____________________ 03 September 2012
A Wessels DATE
Y Carrim and A Ndoni concurring
Tribunal researcher: Thabo Ngilande
For the merging parties: Webber Wentzel
For the Commission: Mogalane Matsimela
1 See pages 5 and 83 of the merger record.
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