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[2014] ZACT 24
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Modern Media Promotions (Pty) Ltd v Main Street 1132 (Pty) Ltd (018218) [2014] ZACT 24; [2014] 1 CPLR 119 (CT) (19 February 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018218
In
the matter between:
MODERN
MEDIA PROMOTIONS (PTY) LTD
Primary Acquiring Firm
And
MAIN
STREET 1132 (PTY)
LTD
Primary Target Firm
Panel : Norman
Manoim (Presiding Member)
Dr
Imraan Valodia (Tribunal Member)
DrTakalani
Madima (Tribunal Member)
Heard
on : 5
February 2014
Order
issued on : 5
February 2014
Reasons
issued on : 19
February 2014
Reasons
for Decision
Approval
[1]
On 5 February 2014, The Competition
Tribunal unconditionally approved the acquisition by Modern Media
Promotions (Pty) Ltd of 71%
of the issued shareholding in Main Street
1132 (Pty) Ltd.
[2]
The reasons for approving the proposed
transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Modern
Media Promotions (Pty) Ltd (“Modern Media”). Modern Media
is controlled by Mr.
Terry Moolman (“Mr. Moolman”)
trading as the Moolman and Coburn Partnership. Mr. Moolman is able to
cast 60% of the
votes that may be cast at a general meeting of Modern
Media. Mr. Moolman also controls the following firms:
•
Afmed
(Pty) Ltd (“Afmed”) through Modern Media’s 50.01%
stake. The remaining shares are held by Element One Limited
(“Element
One”);
•
Caxton
Limited ("Caxton”) - Afmed owns 68.77% of Caxton’s
issued share capital and the Moolman and Coburn Partnership
own a
further 18.46%. Element One owns the remaining 12.77% of the shares
in Caxton;
•
Caxton
& CTP Publishers and Printers Limited (“CAT”) -
Caxton owns 43.17% of CAT’s issued share capital and
Mr.
Moolman directly or indirectly controls the voting of in excess of a
further 6.84% of the shares in CAT.
Primary
target firm
[4]
The primary target firm is Main Street
1132 (Pty) Ltd (“Bid SPV”) which is a special purpose
company formed for the
purpose of the proposed transaction. Bid SPV
is a wholly owned subsidiary of Main Street 1131 (Pty) Ltd (‘Fund
SPV”).
Fund SPV is owned by Remgro Limited (“Remgro”)
through its wholly owned subsidiary Eikenlust (Pty) Ltd (“Eikenlust”)
and RMB Investments and Advisory (Pty) Ltd (“RMBIA”)
which is a wholly owned subsidiary of First Rand Investment Holdings
(Pty) Ltd which is in turn a wholly owned subsidiary of First Rand
Limited (“FRL”).
[5]
Fund SPV, Remgro and FRL will not
control Bid SPV once the transaction is implemented. Bid SPV will
upon implementation control:
•
CAT;
•
Element
One Limited;
•
Afmed;
and
•
Caxton.
[6]
Bid SPV and Element One do not control
any firms. Afmed however controls Caxton, which in turn owns 43.17%
of the issued share capital
of CAT. CAT and the firms directly or
indirectly controlled by CAT are hereinafter referred to as the “CAT
Group”.
Proposed
Transaction and Rationale
[6]
The
proposed transaction constitutes a group restructuring which will
occur in eleven interdependent and cross conditional steps,
the
precise details of which are not relevant for our purposes of
competition assessment.
[1]
The move from pre- to post-merger ownership and control can however
be set out as follows:
•
The
transaction results in Modern Media acquiring 71% of Bid SPV’s
shares. Modern Media accordingly acquires section 12(2)(a)
control of
Bid SPV. No other firm will control Bid SPV upon implementation;
•
Remgro
and RMBIA who collectively hold the entire issued share capital of
Bid SPV through Fund SPV at the commencement of the transaction
will
no longer control Bid SPV upon implementation of the proposed
transaction;
•
Bid
SPV will acquire 41.9% (and thus section 12(2)(b) control) of CAT.
CAT is however already controlled by Mr. Moolman (who in
turn
controls Modern Media, who will control Bid SPV post-merger)
therefore the acquisition of section 12(2)(b) control accordingly
does not give rise to the effective change in control of CAT;
•
Bid
SPV will also acquire 100% of the shares in Element One by virtue of
the transaction. Pre-merger Element One holds 18.9% of
CAT’s
shares and upon implementation of the transaction Element One will
directly hold 12.77% of the shares in Caxton. Element
One also owns
49.9% of the shares in Afmed. Afmed in turn owns 68.8% of the shares
in Caxton pre-merger, which owns 43.17% of the
shares in CAT
premerger;
•
Element
One will acquire 100% of the shares in Afmed by virtue of the
proposed transaction and Afmed’s shareholding in Caxton
will
increase to 87.1%;
•
Element
One will however dispose of its CAT shares and will furthermore no
longer hold an interest in CAT or any other firm (besides
Caxton)
post-merger;
•
Caxton
will in turn unbundle all its CAT shares and no longer hold an
interest in any firm post-merger;
•
In
fact by virtue of the proposed transaction all three of these holding
companies will have disposed of their investments in CAT
and will be
left as shell companies and ultimately deregistered.
[7]
The Acquiring Group views the rationale
for the proposed transaction as a simplification of the control
structure of CAT which unlocks
value for the shareholders of Element
One.
[8]
The Target Group’s rational for
the transaction is that the scheme will allow Element One’s
shareholders to receive
a combination of cash and or a direct
shareholding in freely tradable, listed CAT shares.
Relevant
Market and Impact on Competition
[9]
There is no horizontal or vertical
overlap arising from the transaction. The transaction constitutes a
group restructuring. Element
One, Caxton and Afmed are all investment
holding companies that do not supply goods or services. Mr. Moolman,
who controls Modern
Media and its shareholders and firms controlled
by such shareholders, does not supply goods or services. The
activities of the
firms where RMBIA and Remgro have controlling or
noncontrolling interests do not overlap vertically or
horizontally with the
activities of the CAT Group.
Conclusion
[10]
In light of the above we conclude that
the proposed transaction is unlikely to substantially prevent or
lessen competition. In addition,
no public interest issues arise from
the proposed transactions. Accordingly we approve the proposed
transactions unconditionally.
19
February 2014
DATE
Norman
Manoim
Dr
Imraan Valodia and Dr Takalani Madima concurring
Tribunal
Researcher: Derrick Bowles
For
the merging parties: Janine Simpson - Webber Wentzel
For
the Commission: Zanele Hadebe and Romeo Kariga
[1]
For a full description of the transactional steps see pages 12-15 of
the Record repeated on pages 7-10 of the Commission’s
Report.