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[2016] ZACT 4
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African Rainbow Capital Proprietary Limited and Another v Indwe Broker Holdings Proprietary Limited (LM171Nov15) [2016] ZACT 4 (21 January 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM171Nov15
In
the matter between:
African
Rainbow Capital Proprietary Limited
Sanlam
Life
Insurance
Limited
Primary
Acquiring Firms
and
lndwe
Broker
Holdings
Proprietary
Limited
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Andiswa Ndoni (Tribunal
Member)
: Anton Roskam (Tribunal
Member)
Heard
on
: 15 December 2015
Order
Issued on
: 15 December 2015
Reasons
Issued on
: 21 January
2016
Reasons
for Decision
Approval
[1]
On 15 December 2015, the Competition Tribunal ("Tribunal")
unconditionally approved the merger between the acquiring
firms
African Rainbow Capital Proprietary Limited ("ARC") and
Sanlam Life Insurance Limited ("Sanlam Life")
and the
target firm lndwe Broker Holdings Proprietary Limited ("lndwe").
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firms are ARC and Sanlam Life. ARC is a wholly
owned subsidiary of Ubuntu-Botho Investments (Ply) Ltd
("UBI")
while Sanlam Life is wholly owned by Sanlam Limited.
[4]
Sanlam Life is a registered long-term insurer which provides
comprehensive financial services products to the entry-level,
middle-income and affluent markets as well as professional and
business-owner markets. Sanlam Life is also active in the provision
of short-term insurance brokerage through its control
over
Glacier
Financial Holdings (Ply) Ltd ("Glacier") and Associated
Insurance Brokers (Cape) 2006 (Ply) Ltd ("AIB").
ARC is an
investment- holding company with no other operational activities.
Primary
target firm
[5]
The primary target firm, lndwe is a wholly owned subsidiary of
Sanlam Limited. lndwe itself is a holding company which
does not
conduct its own operational activities but instead owns several
subsidiaries, one of which is a short term insurance
broker and
a licenced financial services provider. Hereinafter lndwe and its
subsidiaries will be referred to as the lndwe Group.
Proposed
transaction and rationale
[6]
Prior to the implementation of the proposed transaction Sanlam Life,
through various shareholdings, indirectly exercised sole
control
over
lndwe. The proposed transaction involves a change of
control whereby the lndwe Group would
move
from being
indirectly controlled by Sanlam Life to being jointly, and directly,
controlled by Sanlam Life and ARC with 51% of the
shareholding in
lndwe being held by ARC and Sanlam Life holding 25% of the
shareholding. The proposed transaction in effect would
result in a
dilution of Sanlam Life's control
over
lndwe.
[7]
The Acquiring Group submitted that the proposed transaction was
intended to grow a new black owned financial services company
in
South Africa. lndwe submitted that the proposed transaction would
provide its business with appropriate distribution and expansion
opportunities in South Africa and Africa and therefore enhance its
profile.
Impact
on competition
[8]
The Competition Commission ("the Commission") in its
investigation found that the proposed transaction resulted in
a
horizontal overlap as Sanlam Life, through Glacier and AIB, and lndwe
are active in the short-term brokerage market. The Commission
also
identified a vertical overlap as Sanlam Life is active in the
provision of short-term insurance and the lndwe Group is active
in
short-term insurance brokerage.
[9]
In its investigation of the horizontal overlap, the Commission
established that there are a number of financial service providers
authorized to render services on short term insurance products
within South Africa. The Commission considered that the proposed
transaction was unlikely to prevent or lesson competition due the
prevalence of alternatives in the market.
[10]
In its evaluation of the identified vertical overlap the Commission
evaluated whether the proposed transaction would lead to
customer or
input foreclosure. It came to the conclusion that it would lead to
neither as there were viable alternatives in the
market to ensure
that a foreclosure strategy would be unsuccessful.
[11]
Although we concur with the Commission's conclusion, i.e. that
the proposed transaction is unlikely to substantially
prevent or
lessen competition in any relevant market we do not agree with the
Commission's approach in evaluating the transaction
as it has no
regard to the pre-merger facts. Prior to the merger Sanlam Life had
indirect control over the whole of lndwe
The effect of the
proposed transaction is to dilute to some extent Sanlam Life's
control and equity through the introduction of
ARC as a shareholder.
The overlaps that Sanlam Life has post merger are thus
irrelevant to the analysis as it had these pre-merger.
Public
interest
[12]
The
merging
parties
confirmed
that
the
proposed
transaction
will
not
result
in
an
adverse
impact on
employment.
[1]
The
proposed
transaction further
raises
no other
public
interest
concerns.
Conclusion
[13]
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.
21
January 2016
DATE
___________________
Mr
Norman Manoim
Ms
Andiswa Ndoni and Mr Anton Roskam concurring
Tribunal
Researcher:
Aneesa Ravat
For
the merging parties: Kesiah
Frank of Glyn Marais
For
the Commission:
Reabetswe Molotsi and Seema Nunkoo
and Xolela Nokele
[1]
Inter
alia
merger
record page 12.