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[2015] ZACT 114
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Levoca 549 (Pty) Ltd and Another v Kelvin Holdings (Pty) Ltd (LM079Jul15) [2015] ZACT 114 (22 September 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM079Jul15
In
the matter between:
Levoca
549 (Pty) Ltd and Government Employees
Pension
Fund
Primary
Acquiring Firms
And
Kelvin
Holdings (Pty)
Ltd
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Medi Mokuena (Tribunal
Member)
: Andreas Wessels
(Tribunal Member)
Heard
on
: 26 August 2015
Order
issued on
: 26 August 2015
Reasons
issued on :
22 September 2015
Reasons
for Decision (Public Version)
Approval
[1]
On 26 August 2015 the Competition Tribunal ("Tribunal")
unconditionally approved the large merger between Levoca 549
(Pty)
Ltd ("Levoca") and Government Employees Pension Fund
("GEPF") and Kelvin Holdings (Pty) Ltd ("Kelvin
Holdings"). The reasons for approving the transaction follow.
Parties
to the transaction
[2]
The
first
primary
acquiring firm is
Levoca, a
newly registered
and dormant
company which does not conduct
any
business activities. Levoca
is
ultimately
controlled
by
Pan
African
Infrastructure
Development Fund ("PAIDF")
[1]
,
a trust established in
South
Africa, which
has
a 95.5%
shareholding
in
Aldwych
Holdings
Ltd
("Aldwych
Holdings").
Aldwych Holdings wholly-owns Aldwych Power Holdings Ltd ("Aldwych
Power''},
which
in
turn wholly-owns Aldwych
Kelvin
Holdings Ltd
("Aldwych
Kelvin").
Aldwych
Kelvin
in
turn
wholly-owns
Levoca.
PAIDF and the Aldwych
Group do
not control
businesses
in the
power
generation market in South Africa, other than that associated with
Kelvin
Power
Station. The Kelvin Power Station generates part
of the
electricity
purchased
and
distributed
by
it
to City
Power
Johannesburg
("City
Power''},
a
wholly-owned
company of
the
Municipality
of
Johannesburg.
[3]
The second primary acquiring firm is GEPF, a
juristic
person established by section 2 of the Government
Employees
Pension Law Act.
[2]
GEPF is
a
defined
benefit pension fund,
which is
predominantly
involved in
managing
and
administering pensions and
other
benefits
for
government
employees in
South
Africa.
GEPF has
no
subsidiaries.
[4]
The primary target firm is Kelvin Holdings a special purpose
investment holding company, with a sole purpose of holding shares
in
Kelvin Power (Pty) Ltd ("Kelvin Power''). Kelvin Power owns the
Kelvin Power Station. Kelvin Power's only business is to
operate the
Kelvin Power coal fired power station and to sell electricity
generated by it.
Proposed
transaction and rationale
[5]
Through a Sale of Shares and Claims Agreement, Levoca and GEPF will
jointly acquire shares in Kelvin Holdings, therefore establishing
control over Kelvin Power. Post-merger Levoca will hold [..%]
shareholdings in Kelvin Holdings, whilst GEPF will also hold [..%]
shares in Kelvin Holdings. Kelvin Holdings will hold all the shares
in Kelvin Power, as it does pre-merger.
[6]
For PAIDF and GEPF, the proposed transaction provides an investment
in future development within the energy sector. For the
target firm's
present shareholders the merger enables them to exit an asset which
they consider subjects them to too much financial
exposure.
Competition
assessment
[7]
The relevant product market is the market for the generation of
power. The Commission submitted that no horizontal overlap occurs
as
a result of the proposed transaction. The only change that the
proposed transaction brings is a change in ownership; however
ownership incentives do not change, as both prior to and
subsequent to the transaction, the owners are financial institutions
who have no interest in firms that provide power generation services
in Johannesburg. The new owners will outsource the management
of the
target firm to an engineering company, also called Aldwych, which is,
pre-merger, already performing that function. The
Commission
contacted City Power to ascertain whether it had any concerns with
the proposed transaction. City Power advised that
it has a bulk power
purchase agreement with Kelvin Power, with an option to renew when
the agreement comes to an end in six years'
time. City Power further
advised that it had no concerns with the proposed transaction.
[8]
Based on the above analysis, the Commission came to the conclusion
that the proposed transaction will not substantially prevent
or
lessen competition in the identified market. We concur with the
Commission on this finding.
Public
Interest
[9]
The proposed transaction will not have any negative impact on
employment. The proposed transaction raises no other public interest
concerns.
CONCLUSION
[10]
We agree with the Commission's findings that the proposed
transaction is unlikely to substantially prevent or lessen
competition in the identified market. We therefore approve the
transaction without conditions.
22
September 2015
DATE
______________________
Mr
Norman Manoim
Ms
Medi Mokuena and Mr Andreas Wessels concurring.
Tribunal
Researcher:
Caroline Sserufusa
For
the merging parties:
Stephen
Langbridge of Fasken Martineau and Burton Phillips of Norton
Rose Fulbright
For
the Commission:
Nolubabalo Myoli
[1]
PAIDF is a large-scale long-term infrastructure fund created to make
infrastructure investments on the
African
continent.
[2]
Act
21
of
1
996.