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[2014] ZACT 19
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Newshelf 1273 Pty Ltd v Business of Joint Medical Holdings Ltd (018192) [2014] ZACT 19 (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 : DrTakalani
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
Dr
Takalani 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