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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:68/LM/Jun12
[015305 ]
In the matter between:
Richtrau No. 229 (Pty) Ltd
Acquiring Firm
And
Avusa Ltd
Target Firm
Panel : Yasmin Carrim (Presiding Member)
Andreas Wessels (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 22 August 2012
Order issued on : 22 August 2012
Reasons issued on : 28 September 2012
Reasons for Decision
Approval
[1] On 22 August 2012 the Competition Tribunal (“Tr ibunal”) conditionally
approved the acquisition by Richtrau No. 229 (Pty) Ltd of Avusa Ltd. The
reasons for the approval follow below.
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Parties and their activities
[2] The primary acquiring firm is Richtrau No. 229 (Pty) Ltd (“Richtrau”), a
company incorporated under the laws of the Republic of South Africa.
Richtrau is wholly-owned subsidiary of Mvelaphanda Group Ltd (“Mvela”).
Mvela is a public company listed on the JSE and is therefore not controlled
by any individual or firm. Richtrau currently has 2 1.29% shareholding in
the primary target firm.
[3] Richtrau is an investment holding company that was incorporated solely for
the purpose of holding its existing interest in the primary target firm. It
provides no products or services and holds no inves tments in any firms
other than the primary target firm.
[4] The primary target firm is Avusa Ltd (“Avusa”), a public company listed on
the JSE. Avusa’s issued share capital is held as fo llows (as at June 2012):
Richtrau (21.29%), Coronation Fund Managers Ltd (20 .58%), UHC
Communication (Pty) Ltd (16.53%), Public Investment Corporation (12%),
Kagiso Asset Management (Pty) Ltd (10.50%), Investm ent Solutions Ltd
(5.59%) and others (13.51%).
[5] Avusa is a listed media and entertainment compa ny which owns
newspapers, magazines and various online services. Avusa is also a
producer/publisher, distributor and retailer of music, films and books.
Description of the transaction
[6] Richtrau, which currently has 21.29% shareholdi ng in Avusa, intends to
acquire the remaining 78.71% of the Avusa shares. O n completion of the
transaction Richtrau will have sole control over Avusa.
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Rationale for the transaction
[7] Mvela submitted that that this transaction is a mechanism to inter alia,
return capital to shareholders in a tax efficient w ay, cater for the current
debt against the Avusa shares and to return an asse t that is structured
better to create value for its shareholders. In res pect of Avusa the parties
submitted that it has not been run optimally and si gnificant inefficiencies
and costs have crept in over the years. The propose d transaction is
therefore aimed at introducing a turnaround strateg y which will focus on
specific measures which are intended to unlock the value of Avusa.
Competition Analysis
[8] There is no overlap between the activities of t he merging parties as
Richtrau is an investment holding company and does not provide any
products or services. Richtrau also does not have i nvestments in any firms
other than Avusa. Further, Mvela’s other subsidiaries are neither active nor
have investments in the area of media and communica tions or sectors in
which Avusa is actively involved.
Public interest
[9] The merging parties had initially submitted to the Commission that about
50 skilled employees, employed at management level at Avusa head
office, might be retrenched post-merger in a worst case scenario.
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Although the parties had indicated that no final de cision had been made
regarding whether the retrenchments will in fact be implemented, the
Commission was informed by one the unions represent ing employees at
Avusa, namely, the South African typographical Unio n (“SATU”) that it is
concerned as there have been retrenchments already at Avusa and it is
not certain if these will continue post-merger. The se retrenchments,
according to the merging parties, are not merger sp ecific but rather form
1 This amount represents about 1% of Avusa’s total number of employees.
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part of an ongoing retrenchment and right-sizing ex ercise, which would
proceed even absent the merger.
[10] At the hearing we were informed by the merging parties that the correct
number of employees at Avusa’s head office is 27. T he merging parties
further indicated that only 14 employees consisting of 9 skilled and 5 semi-
skilled employees are likely to be retrenched. Whe n asked if it’s not
possible to redeploy the 5 semi-skilled employees t he parties indicated
that they would make every effort to redeploy these employees within the
merged entity post transaction.
[11] Based on the above, were are satisfied that th e proposed transaction will
not result in a substantial adverse effect on emplo yment as the potential
retrenchments arising from the transaction will onl y affect a small number
of employees.
Conclusion
[12] The proposed transaction is unlikely to substa ntially prevent or lessen
competition as there is no overlap in the activitie s of the merging parties.
In relation to the potential retrenchments, we appr ove the proposed
transaction subject to the condition that the numbe r of employees to be
retrenched at Avusa’s head office shall not exceed 14 and that the parties
shall endeavour, before retrenching any semi-skille d employee, to
redeploy any such semi-skilled employee as an alter native to
retrenchment. This condition is attached to these r easons market as
annexure 1.
____________________ 28 September 2012
Yasmin Carrim Date
Andreas Wessels and Andiswa Ndoni concurring.
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Tribunal researcher: Ipeleng Selaledi
For the merging parties: Jerome Wilson instructed by Webber Wentzel
Attorneys
For the Commission: Mogau Aphane