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[2015] ZACT 76
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Old Mutual Alternative Investments Holdings Proprietary Limited v African Infrastructure Investment Managers Proprietary Limited and Another (LM062Jul15/021782) [2015] ZACT 76 (9 November 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM062Jul15/021782
In
the matter between:
Old
Mutual Alternative Investments
Holdings
Proprietary
Limited
Primary Acquiring Firm
and
African
Infrastructure Investment Managers Proprietary Limited
and
African
Infrastructure Investment
Fund
2 General Partner Proprietary
Limited
Primary Target Firms
Panel
: Norman Manoim (Presiding Member)
: Anton Roskam (Tribunal
Member)
: Fiona Tregenna
(Tribunal Member)
Heard
on
: 14 October 2015
Order
Issued on
: 14 October 2015
Reasons
Issued on
: 9 November
2015
Reasons
for Decision
Approval
[1]
On 14 October 2015, the Competition Tribunal ("Tribunal")
unconditionally approved the merger between Old Mutual Alternative
Investment Holdings Proprietary Limited ("Old Mutual
Alternative") and African Infrastructure Investment Managers
Proprietary
Limited ("AllM") and African Infrastructure
Investments Fund 2 General Partner Proprietary Limited ("AllF2")
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm, Old Mutual Alternative is a newly
incorporated private company. It is wholly-owned by Old Mutual
Investment Group (South Africa) Holdings (Pty) Ltd which is in turn
wholly-owned by Old Mutual Group Holdings (South Africa) (Pty)
Ltd
("OMSA"). OMSA is a wholly-owned subsidiary of Old mutual
(Netherlands) B.V. which is in turn wholly-owned by OM
Group (UK)
Limited.
[4]
What we will now refer to as "the Acquiring Group"
comprises the companies listed above. It is an international
long-term
savings, banking and investment group. Old Mutual
Alternative is responsible for the management of IDEA Managed Funds
of the Acquiring
Group. IDEA Managed Funds is a domestic
infrastructure equity fund which invests in economic
infrastructure, social infrastructure
and renewable energy.
Primary
target firm
[5]
The Target firm, AllM is jointly controlled by Macquarie Africa (Pty)
("Macquarie Africa") Ltd and Old Mutual Investment
Group
(South Africa) Holdings. The second target firm, AllF2 is jointly
controlled by Macquarie Africa and Winterbreeze Investment
Holding
Company (Pty) Ltd which is a subsidiary of Old Mutual Investment
Group (South Africa).
Proposed
transaction and rationale
[6]
In terms of the proposed transaction Old Mutual Alternative intends
to acquire the 50% shareholding held by Macquarie Africa
in each of
the firms respectively. Subsequent to the transaction the Acquiring
Group will exercise sole control over AllM and AllF2.
[7]
The Acquiring Group submitted that the proposed transaction offers
attractive growth prospects and broadens their South African
footprint. Macquarie Africa intends to focus its resources on
businesses which are core to its parent company.
Impact
on competition
[8]
The Commission when investigating the activities of the merging
parties found the following:
(i)
A horizontal overlap in private equity investment, as the Acquiring
Group is active in this market outside of the
joint-venture with
Macquarie Africa.
(ii)
A horizontal overlap in the production of renewable energy as both
merging parties invest in firms active in the
production of renewable
energy.
(iii)
A vertical relationship between the merging parties exists as the
Acquiring Group provided finance, regulatory
compliance and
fund-raising support services to AllM.
[9]
In its investigation of the horizontal overlap in private equity
investment, the Commission found that the merging parties would
have
a post-merger market share of less that 10% with an accretion which
falls below 5%. It also found that the merged entity would
continue
to face competition from other private equity investment firms within
the market post-merger. In light of their findings
the Commission was
of the view that the proposed transaction was unlikely to
substantially lessen or prevent competition in this
market.
[10]
Regarding
the
market for
the
production
of
renewable
energy,
the
Commission
estimated
the merged entity's market share to fall below 20% with an accretion
of less than
10%.
[1]
The
Commission
was
of
the
view
that
the
merged
entity
would not
be
able
to
exercise
market
power
within
this
market
as
Eskom,
the
only
customer
of
renewable
energy,
retains
exclusive
rights
to
transmit
electricity
to
end
consumers. The merged entity would also be constrained by other
renewable
energy
producers who account for approximately 80% of the market. The
Commission was of the view that the proposed transaction would
unlikely lead to substantially prevent or lessen competition in the
market for the production of renewable energy in South Africa.
[11]
The Commission when investigating the vertical overlap
between the merging parties found that AllM
only procured
these services from the Acquiring Group and not from any
other third party service provider. It also
found that the
Acquiring Group likewise, does not provide these services to
any other third party.
Due to these facts the
Commission was of the view that the proposed transaction would
unlikely lead to customer or competitor foreclosure
concerns. It was
therefore of the view that the proposed transaction would unlikely
lead to a substantial lessening or prevention
of competition.
[12]
The Tribunal accepts the Commission's findings in relation to
the horizontal overlaps in private equity investment and
renewable
energy production. We further find that the vertical overlap does not
present any foreclosure concerns. We therefore
conclude that the
proposed transaction is unlikely to substantially prevent or lessen
competition in any market within South Africa.
Public
interest
[13]
The merging
parties
confirmed that the proposed transaction
will not
result in an
adverse
impact
on
employment.
[2]
The
proposed
transaction
further
raises no
other
public
interest
concerns.
Conclusion
[14]
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 transactions. Accordingly, we approve the
proposed
transaction unconditionally.
09
November 2015
DATE
___________________
Mr
Noroman Manoim
Mr
Anton Roskam and Ms Fiona Tregenna concurring
Tribunal
Researcher:
Aneesa Raval
For
the merging parties: Susan
Meyer and Nazeera Mia of Cliffe Dekker Hofmeyr For
[1]
During the hearing the merging parties submitted that many of the
firms which the Commission included in the market share calculation
are not controlled by the Old Mutual Group and therefore the market
share would be less than 10%.
[2]
Inter
alia
merger
record page 9.