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[2014] ZACT 2
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Newshelf 1273 Proprietary Limited v Business of Joint Medical Holdings Limited (018192) [2014] ZACT 2; [2014] 1 CPLR 123 (CT) (15 April 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018192
In the matter
between:
NEWSHELF
1273 PROPRIETARY
LIMITED
.......................................................
Primary
Acquiring Firm
AND
THE
BUSINESS OF JOINT MEDICAL HOLDINGS
LIMITED
................................
Primary
Target Firm
Panel: Dr Takalani
Madima (Presiding Member)
; Prof Imraan
Valodia (Tribunal Member)
: Anton Roskam
(Tribunal Member)
Heard on : 26 March
2014
Order Issued on : 26
March 2014
Reasons Issued on :
15 April 2014
Reasons for
Decision
Approval
[1]
On 26 March 2014 The Competition Tribunal
(“the
Tribunal”)
unconditionally
approved an acquisition by Newshelf 1273 (Pty) Ltd of the business of
Joint Medical Holdings Ltd.
[2] The reasons for
unconditionally approving the proposed transaction follow hereunder.
Parties to the
Transaction
Primary acquiring
firm
[3]
The primary acquiring firm is Newshelf 1273 (Pty) Ltd
(“Newshelf),
a
newly incorporated shelf company which has no history of business
operations.
[4]
Newshelf is owned by Joint Medical Holdings Limited
(“JMH”)
and
RMB Ventures Six Limited
(“RMBV”).
JMH
is a private hospital group with five hospitals in and around the
greater Durban Metro area.
[5]
RMBV is managed by Rand Merchant Bank, the investment banking arm of
FirstRand. FirstRand is a public company listed on the
Johannesburg
Securities Exchange
(“JSE”)
and
the Namibian Stock Exchange with no single shareholder exercising
direct or indirect control over it.
Primary target
firm
[6]
The primary target firm is the business of JMH. The business of JMH
comprises five hospitals in and around the Durban Metro
area with a
total of 552 beds. The hospitals are owned by 306 medical
practitioners
(“the
Doctor Shareholders”).
Proposed
Transaction
[7] The proposed
transaction is to occur through the following steps:
•
the
exit of Life Healthcare Group
(“LHG”)
as
controlling shareholder of JMH;
•
the
business of JMH will be transferred to Newshelf in exchange for
Newshelf shares; and
•
RMBV
is to acquire a minority controlling interest in Newshelf.
[8] Post-merger, the
issued share capital of Newshelf will be held as to 75-85% by JMH and
15-25% by RMBV.
Rationale
[9] The Doctor
Shareholders view the transaction as an opportunity to optimally
structure JMH and introduce an investor. LHG views
the terms on which
it is exiting JMH as commercially sensible. RMBV, as a private equity
investor, considers the acquisition of
a stake in Newshelf to
represent an attractive risk adjusted return for investors.
Relevant Market
and Impact on Competition
[10] The affected
hospitals are JMH Ascot Park Hospital, JMH City Hospital, Maxwell
Clinic, JMH lsipingo and JMH Durdoc Hospital;
ail of which are
private hospitals situated in and around the greater Durban Metro
area. The relevant market was thus defined as
the market for the
provision of private hospital services in the greater Durban Metro
area.
[11] Both from a
regulatory and a costs perspective, barriers to entry in the relevant
market are notably high. No hospital may
be established prior to
compliance with stringent licensing regulations and high costs are
incurred in relation to infrastructure,
equipment and personnel.
[12] Prior to the
proposed transaction taking effect, Newshelf, being a newly
incorporated shelf company, is not active in any particular
market.
There thus exists no overlap between the activities of the merging
parties. The proposed transaction is in fact likely
to increase
competition in the relevant market since pre-merger, LHG is a
controlling shareholder of JMH while post-merger JMH
and LHG are
likely to be direct competitors in the market for the provision of
private hospital services in the Durban Metro area.
[13] A noteworthy
countervailing factor specific to the relevant market stems from the
manner in which tariffs are determined. Private
hospital and large
medical schemes enter into negotiations to arrive at suitable
tariffs. These medical schemes wield considerable
negotiating power
and will continue to constrain the merged entity post-merger.
[14] In light
thereof, the Tribunal found that the proposed transaction is unlikely
to substantially prevent or lessen competition
in the market for the
provision of private hospital services in the greater Durban Metro
area.
Public Interest
[15] No public
interest concerns were identified by the Commission or the merging
parties. The Tribunal is similarly of the view
that no public
interest concerns arise from the proposed transaction.
Conclusion
[16] In light of the
above I conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition in
the market for the
provision of private hospital services in the greater Durban Metro
area.
Accordingly, I
approve the transaction unconditionally.
15
April 2014
DATE
DrTakalani Madima
Prof Imraan
Valodia and Anton Roskam concurring
Tribunal Researcher:
Shannon Quinn
For the merging
parties: Mark Garden- ENS Africa
For the Commission:
Rakgole Mokolo