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[2015] ZACT 94
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Iridescent Investments Proprietary Limited v Servest Group Proprietary Limited (LM042Jun15) [2015] ZACT 94 (27 July 2015)
COMPET
I
TION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM042Jun
1
5
I
n
the matter between:
I
r
i
descent
I
nvestments
Proprietary
Lim
i
ted
Primary
Acquiring
Firm
and
Servest
Group Proprietary
Limited
Primary
Target
Firm
Panel
: Norman Manoim (Presiding Member)
: Yasmin
Carrim (Tribunal Member)
: Andiswa Ndoni
(Tribunal Member)
H
eard
on
:
8
Ju
l
y
2015
Order
I
ssued on
:8
Ju
l
y
2015
Reasons
I
ssued on
:27
July
2015
Reasons
for
Decision
(Public
Version)
Approval
[1]
On 8 July 2015, the Competition Tribunal ("Tribunal")
unconditionally approved the merger between Iridescent Investments
Proprietary Limited ("BidCo") and Servest Group Proprietary
Limited ("Servest Group")
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm BidCo is a firm incorporated in South
Africa. It is a wholly owned subsidiary of Kagiso Tiso Holdings
Proprietary Limited ("KTH").
[4]
KTH is a black controlled and managed investment company comprising
of listed and private investments. KTH's investment portfolio
includes a diverse range of sectors including media, property,
pharmaceuticals and infrastructure. Relevant to this transaction
is
KTH's control of Eris Property Group ("Eris") which is a
property services company providing a range of commercial
property
skills including property management which requires Eris to outsource
certain facilities management services.
Primary
target firm
[5]
The primary target firm is the Servest Group which controls Servest
Proprietary Limited which in tum controls a number of property
and
subsidiary companies, dormant companies and foreign African
subsidiaries.
[6]
The Servest Group is a multi-service solutions group focussed on
providing facilities management services in the following categories:
cleaning, hygiene, security, parking management, landscaping and turf
maintenance, marine services and office services and facilities
management.
Proposed
transaction
and
rationale
[7]
The
proposed
transaction
i
nvolved
B
i
dCo
acquiring
49%
of
the
issued
shares
in
Servest
Group
wh
i
ch
would resu
l
t
i
n
BidCo being able to materially
i
nfluence
the policy
of
the
target
group.
[1]
[8]
KTH submits that
as
a black
controlled
and
managed
i
nvestment
holding
company the proposed transaction
i
s
an attractive
i
nvestment
opportun
i
ty
due to certain
factors
present within the Servest
Group.
For the
Servest
Group the
proposed transaction
would allow
for additional BEE ownership and result in it being the first
majority black
owned
multi-services provider in South Africa.
I
m
pact
on competition
[9]
The Competition Commission ("the Commission") found a
vertical overlap in respect to the provision of property management
services provided by KTH through Eris and the provision of facilities
management services provided by the Servest Group.
[10]
The Commission in analysing whether the transaction resulted in input
foreclosure or customer foreclosure found that the proposed
transaction would be unlikely to result in either.
[11]
In its analysis of the possibility of input foreclosure, the
Commission considered whether the transaction would result in
the
Servest Group being able to exercise market power in the upstream
market for the provision of facilities management services
to the
detriment of its customers. The Commission found that Servest Group's
small market share of 8.5% as well as the prevalence
of alternatives
in the market would continue to constrain the Servest Group
post-merger. As a result the Commission found that
the proposed
transaction was unlikely to raise input foreclosure concerns.
[12]
The
Commission
evaluated
whether the
merged
entity
wou
l
d
h
ave
the
ability
to
foreclose
i
ts
competitors
i
n
the
upstream market for the provision of facilities management services
from accessing a sufficient customer base in
the
downstream
market for
the
provision
of property management
services.
The
Commission
found
several
firms
in
the
downstream
market
that
would
continue
to
procure
facilities
management
services
from
the
Servest
Group's
upstream
competitors.
The
Commission
further found that Eris does not enjoy market power in the downstream
market
as
i
t
would only have 0.2% market share in the market
i
f
i
t
were included.
[2]
As a
result
the
Commission
found
that
the
proposed
transaction
is
unlikely
to
raise
customer
foreclosure
concerns.
[13]
Based on the above analysis the Commission concluded that the
proposed transaction would be unlikely to lead to a substantial
prevention or lessening of competition in any market.
[14]
We concur with the Commission's competition assessment, i.e. that the
proposed transaction is unlikely to substantially prevent
or lessen
competition in any relevant market. We further agree that it is
unlikely that the proposed transaction would result in
either
customer or input foreclosure.
Public
interest
[15]
The
merging
parties confirmed
that
the
proposed
transaction will not result in an
adverse
i
mpact
on employment.
[3]
The proposed
transaction further raises no other public
i
nterest
concerns.
Conclusion
[16]
In light of the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition
in any
relevant market. In addition, no public interest issues arise from
the proposed transaction. Accordingly, we approve the
proposed
transaction unconditionally.
27
July 2015
DATE
_____________
Norman
Manoim
Yasmin
Carrim and Andiswa
Ndoni concurring
Tribunal
Researcher:
Aneesa
Ravat
For
the merging parties: Chris Charter and Naasha
Loopoo of Cliffe Dekker Hofmyer Inc
For
the Commission:
Seema Nunkoo, Xolela Nokele and Reabetswe Molotsi
[1]
[
]
[2]
Market
share as calculated by the merging parties
Inter
alia
Page
40 of the Record
[3]
Inter
alia
merger record page 10