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[2014] ZACT 63
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Tsogo Investment Holding Company (Pty) Ltd v Tsogo Sun Holdings Ltd (019372) [2014] ZACT 63 (19 November 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 019372
In the matter
between:
Tsogo
Investment Holding Company (Pty)
Ltd
...............................................................
Acquiring
Firm
And
Tsogo
Sun Holdings
Ltd
..........................................................................................................
Target
Firm
Panel: Yasmin Carrim
(Presiding Member)
Andreas Wessels
(Tribunal Member)
Fiona Tregenna
(Tribunal Member)
Heard on : 22
October 2014
Order issued on : 22
October 2014
Reasons issued on :
19 November 2014
Reasons for
Decision
Approval
1. On 22 October
2014 the Competition Tribunal (the “Tribunal”)
unconditionally approved an acquisition by Tsogo Investment
Holding
Company (Pty) Ltd (“TIHC”) of Tsogo Sun Holdings Ltd
(“Tsogo Sun”).
2. The reasons for
the approval of the proposed transaction follow.
The Parties and
their activities
3. The primary
acquiring firm is TIHC, a company incorporated in accordance with the
company laws of the Republic of South Africa.
TIHC is controlled by
Hosken Consolidated investments Ltd (“HCI”) which is
listed on the Johannesburg Securities Exchange
Ltd (“JSE”).
HCI is not controlled by any single shareholder. Its largest
shareholders are the Southern African Clothing
and Textile Workers’
Union (“SACTWU”) and Mr. M.J.A. Golding with 32.2% and
6.78% shareholding respectively.
4. HCI controls
several firms in South Africa. Relevant for purposes of this
transaction is HCI’s controlling interest (51.7%)
in Niveus
Investments Ltd (“Niveus”), a company incorporated in the
Republic of South Africa and listed on the JSE.
Niveus wholly-owns
the following firms: (i) Vukani Gaming Corporation (Pty) Ltd, Galaxy
Bingo International South Africa (Pty)
Ltd and Cherry Mass Trade and
Invest 188 (Pty) Ltd. In addition, Niveus has a 60% controlling
interest in Kuruman Casino. TIHC
currently jointly controls the
primary target firm, i.e. Tsogo Sun.
5. The HCI group is
a black empowerment investment holding company with investments in
sectors such as media and broadcasting, clothing
and textiles,
transport, industrial, property, casino and non-casino gaming and
entertainment. Niveus’ subsidiaries are involved
in gaming and
leisure activities such as Bingo, Limited Pay-out Machines (“LPMs”)
and bookmaking business or spot betting.
Kuruman Casino is located in
Kuruman, Northern Cape Province, and is due to be operational in
December 2014.
6. The primary
target firm is Tsogo Sun, a company incorporated in accordance with
the company laws of the Republic of South Africa.
Tsogo Sun is
jointly controlled by TIHC and SABSA Holdings Ltd “(SABSA”)
with 41.3% and 39.6% respectively. SABSA is
controlled by SABMiller
pic (“SABMiller”) which is listed on the JSE and the
London Stock Exchange. Tsogo Sun controls
several firms in South
Africa.
7.
Tsogo Sun’s business activities are divided into two main
operating divisions, i.e. Tsogo Sun Gaming (ownership and operation
of gaming and entertainment complexes in South Africa) and Tsogo Sun
Hotels (ownership, leasing and managing of hotels across South
Africa, the rest of Africa, the Middle East and the Seychelles. In
addition, Tsogo Sun has commercial property interests
1
such as the Palazzo Towers, the Pivot, the building abutting the
Southern Sun Cape Sun Hotel and the property which previously
housed
the Grace Hotel.
Proposed
transaction and rationale
8. In terms of the
proposed transaction HCI, through TIHC, intends to acquire additional
shares in Tsogo Sun to increase its shareholding
to more than 50% of
the issued share capital of Tsogo Sun. Post-merger, HCI will
ultimately acquire sole control over Tsogo Sun.
9. HCI submitted
that this transaction presents an opportunity for it to acquire a
greater interest Tsogo Sun and to increase its
exposure to the
attractive investment opportunity therein.
10. SABMiller
submitted that it conducted a strategic review of its holding in
Tsogo Sun and following completion of this review,
it resolved that
gaming and hotels are not core to its operations and has decided to
exit its investment in Tsogo.
Competition
Analysis
11. In assessing the
competitive effects of the proposed transaction, the Commission
considered whether casinos compete with other
forms of gambling such
as bingos, LPMs and betting. Although the Commission found that the
products and services offered by casinos
are distinct from other
forms of gaming (i.e. bingos, LPMs and betting) it did not find it
necessary to conclude on the relevant
product market but analyzed the
effects of this transaction on the narrow market for casino gaming.
12. In the narrow
market for casino gaming the activities of the merging overlap as
Tsogo Sun operates casinos throughout South
Africa and HCI, through
Niveus, controls Kuruman Casino. The Commission found that Tsogo Sun
does not own casinos in the Northern
Cape Province and that Tsogo
Sun’s casino which is closed to Kuruman casino is the
Goldfieids casino in Welkom, Free State
Province.
13.The Commission
further established that Kuruman casino and Goldfieids casino are
about 408 km and 5 hours’ drive from each
other. Due to the
distance and driving time between Kuruman and Goldfieids casinos, the
Commission found that the two casinos are
unlikely to exert a
competitive constrain on each other and consequently concluded that
there is no geographic overlap between
the activities of the parties
in the market for casino gaming. Accordingly, the Commission found
that the proposed transaction
is unlikely to substantially lessen or
prevent competition in the market for casino gaming.
Public interest
14.The
merging parties confirmed that the proposed transaction will have no
adverse effect on employment and will not result in
any retrenchments
in South Africa.
2
The proposed transaction raises no other public interest concerns.
Conclusion
15. For the reasons
mentioned above, we approve the proposed transaction unconditionally.
19 November 2014
Date
Ms. Yasmin Carrim
Mr, Andreas
Wessels and Professor Fiona Tregenna concurring
Tribunal Researcher
: Ipeleng Selaledi
For the primary
acquiring firm : Lizel Blignaut of Edward Nathan
Sonnenbergs
For the primary
target firm: Anthony Norton of Nortons inc.
For the Commission :
Tshegofatso Radinku
1
Other
than in respect of leasing premises to retail businesses such as
restaurants and shops located at its gaming and hotel locations.
2
See
merger record, pages 14. Also see paragraph 7.1 of the Commission’s
merger report.