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[2015] ZACT 101
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Investec Bank Limited v Ferro South Africa (Pty) Ltd (LM086Jul15) [2015] ZACT 101 (27 October 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM086Jul15
In
the matter between:
Investec
Bank
Limited
Primary Acquiring Firm And
Ferro
South
Africa
(Pty)
Ltd
Primary Target Firm
Panel
: Norman Manoim (Presiding Member),
: Medi Mokuena (Tribunal
Member)
: lmraan Valodia
(Tribunal Member)
Heard
on
:07 October 2015
Order
issued on
:07 October 2015
Reasons
issued on
:
27 October 2015
Reasons
for Decision
Approval
[1]
On 07 October 2015 the Competition Tribunal
("Tribunal") unconditionally approved
the large
merger between Investec Bank Limited (Investec") and Ferro
South Africa (Pty) Ltd ("Ferro"). The
reasons for approving
the transaction follow.
Parties
to the transaction
[2]
The primary acquiring firm is Investec a public company incorporated
in terms of the laws of the Republic of South Africa ("RSA").
Investee's holding company, Investec Limited, is a listed company
that houses the companies which conduct the business operations
of
Investec in South Africa. Investec is a registered bank which
conducts business as a bank and financial institution. Investec
is
involved in the provision of a diverse range of financial products
and services to a niche client base in South Africa, Botswana
and
Mauritius. These activities include private banking services,
stockbroking services,
specialised lending and
asset management amongst others. Through interests
that
Investec holds in various companies, Investec is also involved in
other markets such as hospitality, plastic packaging, chemicals
industry, data network solutions market and clay pavers market
amongst others. These companies include Modek, CMC Network (Pty)
Ltd,
Vax Telecom, NCS Resins (Pty) Ltd ("NCS") and Boxmore
Packaging (Pty) Ltd amongst others.
[3]
The primary target firm is Ferro, a company incorporated in
accordance with the laws of RSA. Ferro is jointly controlled by
e
management shareholders and Investec. Ferro is a manufacturer of base
coating materials. Ferro operates within the industrial
chemicals
sector and its business operations include the power coating
division, plastic division, enamels and ceramics division,
glass
colours division, spectrum ceramics division amongst others.
Proposed
transaction and rationale
[4]
Through the proposed transaction, Investec intends to increase its
shareholding in Ferro from 49.69% to 57.24%. This will be
done
through Investee's Principal Investments (iP") division, by way
of a series of transaction steps such as a buy-back of
shares by
Ferro, the issuing of new shares in Ferro to the management
shareholders of Ferro and the sale of shares in Ferro by
NCS.
Post-merger Investec will thus have control over Ferro.
[5]
For Investec, the proposed transaction will provide it with an
opportunity to increase its equity in Ferro, since it is of the
view
that Ferro is well positioned and has good future prospects in the
market it is active in. Ferro on the other hand submits
that the
proposed transaction is an opportunity for Ian Forbes through ID
Forbes Investment CC, to partially exit and obtain value
from his
investment in Ferro.
Competition
assessment
[6]
The proposed transaction results in no horizontal overlap, as the
merging parties are not active in the same markets.
This is because
Investec is an international financial services provider, whilst
Ferro is a manufacturer of base coating materials,
operating in the
chemicals sector.
[7]
The proposed transaction does however give rise to a vertical
overlap, since the Commission discovered that there is a pre-existing
relationship between Ferro and Investec in relation to Investee's
non-controlling interest in Modek, which purchases resin products
produced by NCS. Although the merging parties submitted that the
interest is non controlling, the Commission nevertheless
decided to asses whether Modek can be influenced by Investec
post-merger to exclusively deal with Ferro. The
Commission
found that the Investee's shareholding in Modek is not
sufficient for it to have controlling interest in terms of the
Shareholders
Agreement. The Commission also found that Investec will
thus not be involved in the day to day management of Modek, and will
thus
not be in a position to influence the purchase decisions of
Modek. The Commission also spoke to market participants such as Atlin
Chemicals, KZN Resins (Pty) Ltd and Scott Bader, who indicated that
suppliers of resin will have alternative customers in the market
that
they can supply resin to post-merger, should Modek decide to purchase
its resin requirements exclusively from NCS. The Commission
thus
concluded that the proposed transaction will not result in any
foreclosure concerns post-merger.
[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.
27
October
2015
DATE
_______________________
Mr
Noman Manoim
Mr
Medi Mokuena and Prof. lmraan Valodia concurring
Tribunal
Researcher:
Caroline Sserufusa
For
the merging parties:
Anthony Norton of Nortons
Inc
For
the Commission:
Amanda Mfuphi