COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016253
In the merger between:
LIBERTY GROUP LIMITED PRIMARY ACQUIRING FIRM
and
LIBERTY ACTIVE LIMITED,
CAPITAL ALLIANCE LIFE LIMITED AND
LIBERTY GROWTH LIMITED PRIMARY TARGET FI RMS
Panel : Takalani Madima (Presiding Member)
Andiswa Ndoni (Tribunal Member)
Anton Roskam (Tribunal Member)
Heard on : 20 March 2013
Order issued on : 20 March 2013
Reasons issued on : 18 April 2013
Decision
Unconditional Approval
[1] On 20 March 2013, the Competition Tribunal (“Tr ibunal”), in terms of section
14A(1)(a) of the Competition Act of 1998
1, approved the merger between
Liberty Group Limited and the three target firms, n amely Liberty Active Limited,
Capital Alliance Life Limited and Liberty Growth Li mited. The reasons for
unconditionally approving the proposed transaction follow below.
1 Act No. 89 of 1998, as amended.
Parties to the transaction
[2] The primary acquiring firm Liberty Group Limite d (“Liberty Group”), a wholly
owned subsidiary of Liberty Holdings Limited (“Libe rty Holdings”). Liberty
Group is a financial services group which offers a comprehen sive range of
long-term insurance products and services to both i ndividual and corporate
clients.
[3] The target firms detailed below are all solely controlled by the Liberty Group.
[4] Liberty Active Limited (“Liberty Active”) is a licensed long-term insurance
provider which develops, markets and sells various funeral and life cover
plans specifically for emerging consumers, investme nt plans and lastly,
funeral plans and credit insurance in the embedded risk category.
[5] Capital Alliance Life Limited (“Capital Allianc e”) is a licensed long-term
insurance provider which develops, markets and sell s products with a focus
on group benefits, such as income replacement benef its, permanent disability
benefits, death benefits and progressive educator benefit.
[6] Liberty Growth Limited (“Liberty Growth”) admin isters legacy products, the
majority of which are retail investment and risk po licies, as well as policies
similar to those which Liberty Active sells to emerging customers.
Proposed transaction
[7] In terms of the proposed transaction, Liberty G roup will acquire the
businesses of certain other subsidiaries of Liberty Holdings. This transaction
represents a change in direct control of these busi nesses of the target firms.
However, there will be no change in ultimate contro l of these target firms,
given that they will continue to be indirectly controlled by Liberty Holdings.
[8] Given that the acquiring firm and the three tar get firms all hold separate long-
term insurance licences prior to the transaction, t his transaction will enable
the consolidation of the licences attached to the businesses.
Rationale for the transaction
[9] Liberty Group purchased Capital Alliance, inclu ding the long-term insurance
licences of Capital Alliance and Liberty Growth, ei ght years ago. At that time,
Liberty Group already owned Liberty Active, which a lso holds a long-term
insurance licence.
[10] Thereafter, Liberty integrated its long-term i nsurance operations. Given that
Liberty Group and the three target firms all hold s eparate long-term insurance
licences, there is no clear organisation of product lines or business units and
therefore managing Liberty Group’s long-term insura nce unit is made rather
difficult.
[11] By consolidating the long-term insurance licen ces by means of this
transaction, Liberty Group is able to mitigate vari ous risks, increase the free
capital and reduce the operational complexities of such a structure.
Competition assessment
[12] The merging parties and the Commission segment ed the long-term
insurance market into different classes, depending on the specific risk
covered, such as health, assistance, disability, li fe, fund and sinking fund
policies.
[13] The long-term insurance business of Liberty Gr oup is integrated across the
target firms and the firms do not compete with or s upply one another.
Therefore, there will not be a horizontal nor a ver tical overlap in the activities
of the parties.
[14] As this transaction constitutes an internal re structuring, there will not be a
change in the dynamics of the long-term insurance m arket and the market
shares will remain the same. 2 Thus the estimated market shares of the
consolidated group will remain the same as prior to the transaction. Therefore,
Liberty Group (along with the target firms) has an estimated 28.97% of the
health category, 23.73% of the assistance category, 22.36% of the disability
2 See page 2 of the transcript.
category, 15.9% of the life category and 2.72% of t he fund category. Liberty
Group does not hold a share of the sinking fund category.
[15] There are a number of players in the long-term insurance market which
provide competition for the Liberty Group.
Public interest
[16] The merging parties confirmed that the propose d transaction will not have
any effect on employment. 3 No other public interest issues arise as a result of
this transaction.
CONCLUSION
[17] Given that the dynamics of the market will not change and that there are
many competitors in the market, we conclude that th e proposed transaction is
unlikely to substantially prevent or lessen competi tion in any relevant market.
Furthermore, the proposed transaction raises no oth er public interest
concerns. Accordingly, we approve the proposed merger unconditionally.
___________________ 18 April 2013
TAKALANI MADIMA DATE
Andiswa Ndoni and Anton Roskam concurring
Tribunal Researcher: Nicola Ilgner
For the Commission: Zanele Hadebe
For the merging parties: Webber Wentzel
3 See page 48 of the merger record.