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[2015] ZACT 83
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Investec Bank Limited ("Investec") as nominee for a private Limited liability company (New Itec Holdco) v Itec Group Limited and Another (LM116Aug15) [2015] ZACT 83 (16 November 2015)
COMPETITION
TRIBUNAL
OF
SOUTH
AFRICA
Case
No: LM116Aug15
In
the matter between:
Investec
Bank
Limited
(
i
nvestee")
as
nominee
Primary Acquiring Firms
for
a private Limited liability company (New ltec Holdco)
And
ltec
Group Proprietary Limited and
ltec
Proprietary
Limited
Primary
Target Firms
Panel
: Medi Mokuena (Presiding Member), Andiswa Ndoni (Tribunal Member)
Anton Roskam (Tribunal Member)
Heard
on
: 21 October 2015
Order
issued on
:21 October 2015
Reasons
issued on :16
November
2015
Reasons
for
Decision
Approval
[1]
On 21 October 2015 the Competition
Tribunal ("Tribunal") unconditionally
approved
the large merger between Investec Bank Limited (Investec")
as nominee for a private Limited liability
company (New ltec
Holdco) ("New HoldCo") and ltec Group
Proprietary Limited (itec Group")
and ltec
Proprietary Limited ("itec"). 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
l
aws
of
the
Republic
of
South
Africa
("RSA").
Investec
has six
business divisions
namely:
Investee's Private
banking
division,
Private
Client
Portfolio Management and stockbroking
division, Capital Market
division,
Asset
management
division,
Investec
banking
activities
and
Investec
Properties
Limited.
Through its
interests
in
various
firms,
Investec is
also
involved in
other
sectors such
as
hospitality industry,
plastic
packaging,
manufacturing
of
bricks
and ship
repairs
amongst
others.
Of
relevance
to
the
proposed
transaction
is
Investee's
investment
in
Tarsus
Technology
Group
(Proprietary)
Limited
(TarsusTech")
formerly
known
as
MB
Technologies.
[1]
Tarsus
Tech
is
active
in the
information
technology
("IT")
sector
as
a
seller
and
distributor
of
IT
equipment,
through
entities
such as
Tarsus
Chanel
Capital
Proprietary
Limited
{"Channel
Capital"),
Printacom
Technologies
and
Tarsus
Distribution.
The
brands
distributed
by Tarsus
Tech
include
Canon,
Dell, HP
and Lenovo
amongst
others.
Such
products
are
mainly
supplied
to
resellers
who
then
on-sell to
end users.
Tarsus
Tech
also
provides
financial services,
by
brokering
of
financing
for
I
T
hardware, software and the provision
of credit
through
a
60 day days
credit
plan.
[3]
New Holdco is controlled by a newly formed special purpose vehicle,
Bowwood and Main No 188 Proprietary Limited ("Bowwood
and
Main"), in which Investec will hold 61% and Khulasande Capital
Partners ("Khulasande") 39%.
[4]
Itee's business
is divided
into three
areas
mainly the
importing,
financing
and
selling
of
equipment
and
services
and
on-going-service
and
support of
the
equipment
and
service.
Through its
various
entities
and
channel
partners,
the ltec
group of
companies are
a
l
eading
provider of document
management
and
print
systems,
production
printing, enterprise
communications
and
financial
products.
[2]
ltec
and the
ltec
Group
of
companies
supply
Minolta (which
is
then
branded under
the
ltec
brand)
and
Lexmark IT
equipment.
ltec
also
supplies
IT
equipment
through
a
rental
solution
in terms
of
which
they
lease
the
IT
equipment
and
at
the
end
of
the
lease
ownership
reverts
back
to
ltec.
During
the lease
period
ltec takes
care
of
maintenance
to the
equipment.
In relation
to financial
activities,
ltec/ltec
Group
provides
finance
to
end
users of
its channel
partners
by way
of
l
ease
financing
agreements
and
undertakes
to the
collection
of the
funds
owed.
Proposed
transaction and rationale
[5]
Through
the
Share
Purchase
and
Claims
Agreement,
New
Holdco
will
acquire
control
over
ltec and
ltec Group.
This
will take
place
by way
of
a three
stage process
[3]
.
Post-merger
New
Holdco
will hold
100%
of
ltec
Group
and
ltec.
These
shares
will
be
held
by
an
Investec
controlled
by Bowwood
& Main
90%
and
Management
[4]
10%.
[6]
The proposed transaction provides the ltec Group shareholders with an
opportunity to realise their investment and exit
the market.
ltec on the other hand will also benefit from the introduction of
financial, empowered shareholders and exit from a
majority
shareholder based in the United Kingdom who is not operationally
involved in the target firms.
Competition
assessment
[7]
The proposed transaction grves rise to a horizontal overlap, as the
merging parties are both active in the distribution of IT
equipment
(printers and fax machines) and in the provision of financing
services in the IT market.
[8]
The Commission spoke to various market participants such as Mustek
Limited ("Mustek"), Konica Minolta Inc. ("Minolta")
and Bytes Technology Group (""Bytes"). These
competitors revealed to the Commission that although the merging
parties
are both active in the same markets, they are not direct
competitors, since Tarsus Tech is active in the low-end segment of
the
IT market, whilst the ltec Group is active in the high-end
segment of the market. The difference between the two is that the
low
end segment distributes IT equipment that
is suitable for home and personal
use,
whilst the high-end segment distributes IT equipment suitable for
corporate and government departments because of its capacity.
During
the hearing, Mr Alan Chapman of ltec elaborated further and submitted
that the retention model used by ltec involves the
retention of
ownership over time so that ltec
retains ownership of its
equipment.
[5]
It
was
submitted further
by the
merging parties that leasing
the
equipment makes more commercial sense to the client than to own, as
the equipment comprises of big printers that print high
volumes of
paper at a high speed.
[9]
Based on these submissions, the Commission decided not to assess the
horizontal overlap any further. The Commission thus concluded
that
the proposed transaction is unlikely to substantially prevent or
lessen competition within the IT equipment market. We concur
with the
Commission on its findings.
Public
Interest
[10]
The proposed transaction will not have any negative impact on
employment. The proposed transaction raises no other public
interest
concerns.
CONCLUSION
[11]
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.
16
November 2015
DATE
________________________
Ms
Medi Mokuena
Ms
Andiswa Ndoni and Mr Anton Roskam concurring
Tribunal
Researcher:
Caroline Sserufusa
For
the merging parties:
Natalie von Ey of Cliffe
Dekker Hofmeyr
For
the Commission:
Reabetswe Molotsi
[1]
See
pages
60-61 of the
merger
record.
[2]
See pages 62-64 of the record for a detailed explanation of the ltec
Group of companies.
[3]
See pages 57-58 of the merger record.
[4]
Management refers to New ltec HoldCo, with its shareholders
Investec, Khulasande, Phillip Perkins, Gavin Meyer and
Allan
Chapman.
[5]
See page 5 of the Transcript of the hearing.