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[2015] ZACT 105
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Macquarie Africa (Pty) Ltd v Macquarie First South (Pty) Ltd (LM141Sep15) [2015] ZACT 105 (27 November 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM141Sep15
In
the matter between:
Macquarie
Africa
(Pty)
Ltd
Acquiring Firm
and
Macquarie
First South
(Pty)
Ltd
Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Andiswa Ndoni (Tribunal
Member)
: Medi Mokuena (Tribunal
Member)
Heard
on
: 04 November 2015
Order
issued on
: 04 November 2015
Reasons
issued on
: 27 November 2015
Reasons
for Decision
Approval
1.
On 04 November 2015 the Competition Tribunal (the "Tribunal")
unconditionally approved an acquisition by Macquarie
Africa
(Pty) Ltd ("Macquarie Africa") of Macquarie First South
(Pty) Ltd ("Macquarie First South").
2.
The reasons for the approval of the proposed transaction follow.
The
Parties and their activities
3.
The primary acquiring firm is Macquarie Africa, a company
incorporated in in accordance with the laws of the Republic of South
Africa. Macquarie Africa is controlled by Macquarie Corporate Finance
Limited ("Macquarie Corporate Finance"), which
is
ultimately controlled by Macquarie Group Limited ("Macquarie
Group"). Macquarie Group is a public company listed on
the
Australian Securities Exchange and is not controlled by any firm. The
five largest shareholders of Macquarie Group as at 22
April 2015 are
the following: HSBC Custody Nominees (Australia) Limited (21.52%), JP
Morgan Nominees Australia Limited (16.70%),
National Nominees Limited
(13.34%), Citicorp Nominees (Pty) Ltd (6.39%) and Bond Street
Custodians Limited (5.98%).
4.
Macquarie Africa controls the following firms: Macquarie Investments
(Pty) Ltd ("Macquarie Investments"), African Infrastructure
Investment Managers (Pty) Ltd ("AllM"), and African
Infrastructure Investment Fund 2 GP (Ply) Ltd ("AllF2").
AllM in turn controls African Infrastructure Investment Fund ("AllF")
and South African Infrastructure Fund ("SAIF").
5.
Macquarie Group is an international provider of specialist financial,
banking, advisory, investment and fund management services.
In South
Africa, Macquarie Group is involved in the provision of institutional
stock broking, equity financing, equity derivatives,
structured
finance and corporate and project finance advisory services.
6.
The primary target firm is Macquarie First South, a company
incorporated in accordance with the laws of the Republic of South
Africa. Macquarie First South is a 50/50 joint venture between
Macquarie Africa (the primary acquiring firm) and First South
Financial Services (Pty) Ltd ("FSFS"). FSFS is controlled
by J&J Financial Services (Pty) Ltd ("J&J Financial
Services"). J&J Financial Services is controlled by Jay and
Jayendra (Pty) Ltd ("J&J Group").
Macquarie First South controls Macquarie
First South Securities (Pty) Ltd ("MFSS")
and
Macquarie First South Capital (Pty) Ltd ("MFSC").
7.
Macquarie First South is an investment company with interests in the
financial services industry. Macquarie First South's activities
are
undertaken through its two subsidiaries, i.e. MFSS and MFSC. MFSS and
MFSC are involved in equities research, sales and trading
services
and corporate finance services respectively.
Proposed
transaction and rationale
8.
The proposed transaction involves a share repurchase by Macquarie
First South of FSFS' 50% shareholding interest in the issued
share
capital of Macquarie First South. On completion of the proposed
transaction, Macquarie Africa will become the sole shareholder
and
exercise sole control over Macquarie First South.
9.
The rationale for Macquarie Africa is that it wants to expand its
footprint in Sub Saharan Africa by growing its presence in
South
Africa.
10.According
to FSFS, the proposed transaction provides it with an opportunity to
realise its investment.
Competition
Analysis
11.
The Commission found that there is a horizontal overlap in the
activities of the merging parties as Macquarie Africa has 50%
shareholding in Macquarie First South and is increasing its
shareholding to 100%. The Commission however found that this overlap
does not change the structure of any market and there will be no
accretion in market share as Macquarie is simply increasing its
shareholding in Macquarie First South. The Commission also found that
the merging parties do not compete outside the joint venture.
12.
The Commission further found that there is a vertical relationship in
the activities of the merging parties as MFSC has provided
corporate
advisory services to two of the acquiring group's subsidiaries, i.e.
AllF
and SAIF. The Commission however found that this
relationship is unlikely to result in any foreclosure concerns as
MFSC has a market
share of less than 10% in the market for corporate
advisory services and there are many other firms it competes with in
this market.
The Commission therefore concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition in
any market.
Public
interest
13.
The merging parties submitted that as a result of this transaction,
the current Regional Head of Sub Saharan Africa for Macquarie
Africa,
Dr. Duarte da Silva will leave Macquarie Africa by mutual agreement
to focus his efforts on FSFS, which he co-founded in
2002. Dr Duarte
is currently supported by two staff members who occupy the positions
of executive assistant and administrator.
The merging parties
further submitted that they will investigate the
redeployment of these two staff members
and if redeployment is not
possible, potential retrenchment will commence.
14.
The Commission established that Macquarie First South and its
subsidiaries have a total staff complement of approximately 100
as at
30 September 2015. The Commission concluded that the proposed
transaction is unlikely to result in significant public
interest
concerns as the positions that are likely to be affected are skilled
are only limited to 3 employees. The proposed transaction
raises no
other public interest concerns.
Conclusion
15.
In light of the above, we agree with the Commission that the proposed
transaction is unlikely to substantially prevent or lessen
competition in any market Further, we agree with the Commission that
proposed transaction is unlikely to result in significant
public interest concerns. We therefore
approve the proposed transaction unconditionally.
27
November 2015
Date
___________________
Ms
Yasmin Carnm
Ms
Andiswa Ndoni and Ms Medi Mokuena concurring
Tribunal
Researcher :
lpeleng Selaledi
For
the merging parties :
Candice Upfold of Norton Rose Fulbright
For
the Commission :
Prishani Maheeph