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[2016] ZACT 21
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Land and Agricultural Development Bank of South Africa v Performing Financial Products of the Debtors Book of Capital Harvest (Pty) Ltd (LM226Feb16) [2016] ZACT 21 (30 March 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM226Feb16
In
the matter between:
LAND
AND AGRICULTURAL DEVELOPMENT
BANK
OF SOUTH
AFRICA
Primary Acquiring Firm
and
PERFORMING
FINANCIAL PRODUCTS OF THE
DEBTORS
BOOK OF CAPITAL
HARVEST (Pty)
Ltd
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Medi Mokuena (Tribunal
Member)
: Anton Roskam (Tribunal
Member)
Heard
on
: 2 March 2016
Order
Issued on
: 2 March 2016
Reasons
Issued on
:
30 March 2016
Reasons
for Decision
Approval
[1]
On 2 March 2016, the Competition Tribunal ("Tribunal")
approved the merger between the Land and Agricultural Bank
of South
Africa and the Performing Financial Products of the Debtors Book of
Capital Harvest (Pty) Ltd.
[2]
The reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Land and Agricultural Development Bank
of South Africa ("the Land Bank"), an entity
incorporated
and governed through the Land and Agricultural Development Bank Act
No. 15 of 2002 ("the Land Bank Act").
As such, it is not
subject to control as envisaged in the Competition Act No. 89 of 1998
("the Act").
[4]
The Land Bank is a specialist agricultural bank which provides
financial solutions to participants in the agriculture and rural
development sectors. It provides retail and wholesale finance and
insurance to emerging and commercial farmers/clients.
Primary
target firm
[5]
The primary target firm is the Performing Financial Products of the
Debtors' Book ("the Debtors' Book"), currently
owned by
Capital Harvest (Pty) Ltd ("Capital Harvest"), a firm
incorporated in terms of the laws of South Africa.
[6]
The Debtors' Book provides retail funds directly to agricultural
clients who require such capital to fund farming and agro-processing
activities. The Debtors' Book does not control any firm.
Proposed
transaction and rationale
[7]
The Land Bank intends to acquire Capital Harvest's performing
debtors' book which consists of the Sale Book Debts. Upon completion
of the proposed transaction, the Land Bank will own the Debtors'
Book.
[8]
The Land Bank submits that the proposed transaction will enable it to
increase its capacity and better fulfill its developmental
mandate,
as set out in the
Land and Agricultural Development Bank Act, No. 15
of 2002
.
[9]
The primary target firm submits that it wishes to exit the business
as principal and move to the agency model.
Impact
on competition
[10]
During its investigation, the Commission identified a horizontal
overlap in the downstream market for the provision of retail
financing to the agricultural industry in South Africa. In assessing
this overlap, the Commission sought to determine the extent
to which
the merging parties would be able to unilaterally increase prices
post-merger.
[11]
The Commission found that the merged entity would have a post-merger
market share accretion of approximately 1%. In addition,
the
Commission was of the view that the merged entity would continue to
face competition from other commercial banks and agricultural
cooperatives.
[12]
Furthermore, customers and competitors contacted by the Commission
did not raise any concerns. Customers submitted that the
proposed
transaction was unlikely to have any negative impact on their
business operations and that there were numerous other entities
such
as commercial banks, Industrial Development Cooperation ("JDC")
and International Finance Cooperation ("IFC"),
which also
provide funding at competitive rates.
[13]
Based on the market shares as well as the views of customers and
competitors', the Commission was of the view that the proposed
transaction was unlikely to substantially prevent or lessen
competition in the national market for the provision of retail
financing
to the agricultural industry.
[14]
The Commission also identified a potential vertical effect in the
upstream market for the provision of wholesale financing
to the
agricultural industry.
[15]
According to the Commission, the Land Bank provides Capital Harvest
with wholesale agricultural funding which the Debtors Book
on lends
to farmers. However, given that it is the Land Bank's statutory
mandate to ensure access to financial services by the
commercial
farming sector and agri-business, the Commission found that the Land
Bank was unlikely to engage in input foreclosure.
In addition, direct
competitors of the Debtors Book were found to have alternative
suppliers in the market.
[16]
The Commission was also of the view that customer foreclosure was
unlikely given that Capital Harvest only received wholesale
funding
from the Land Bank.
[17]
The Commission therefore concluded that the proposed
transaction was unlikely to substantially prevent
or
lessen competition.
[18]
We concur with the Commission's conclusion
that the proposed transaction
is
unlikely to substantially prevent or lessen competition in any
relevant market.
Public
interest
[19]
The merging parties confirmed that the
proposed transaction will not result in any
adverse
impact on employment.
[20]
The proposed transaction further raised no other public interest
concerns.
Conclusion
[21]
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 other public interest issues arise
from the proposed transaction. Accordingly, we
approve t
e proposed transaction unconditionally.
30
March 2016
DATE
_______________________
Mr
Norman Manoim
Ms
Medi Mokuena and Mr Anton Roskam
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties: ENSafrica
For
the Commission:
Maanda Lambani