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[2016] ZACT 53
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Liberty Group Limited and Others v Trans African Concessions Proprietary Limited (LM020MAY16) [2016] ZACT 53 (4 July 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM020May16
In
the matter between:
Liberty
Group Limited and the
Public
Investment Corporation SOC Ltd in its capacity as the duly authorized
representative of the
Government
Employees Pension Fund, the Unemployment
Insurance
Fund and the
Compensation
Fund
Primary Acquiring Firms
and
Trans
African
Concessions
Proprietary
Limited
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Mondo Mazwai (Tribunal
Member)
: Andiswa Ndoni (Tribunal
Member)
Heard
on
: 08 June 2016
Order
Issued on
: 08 June 2016
Reasons
Issued on
: 04 July 2016
Reasons
for Decision
Approval
[
1 ] On 8 June 2016, the Competition Tribunal ("Tribunal")
approved the large merger between Liberty Group Limited and
the
Public Investment Corporation SOC Ltd in its capacity as the duly
authorized representative of the Government Employees Pension
Fund,
the Unemployment Insurance Fund and the Compensation Fund, and Trans
African Concessions Proprietary Limited (the target firm).
[
2 ] The reasons for approving the proposed transaction follow.
Parties
to the transaction
Primary
acquiring
firms
[
3 ] The proposed transaction involved an acquisition by two primary
acquiring firms.
[
4 ] The first primary acquiring firm is Liberty Group Ltd ("LGL"),
a company incorporated in accordance with the company
laws of the
Republic of South Africa. LGL is a wholly owned subsidiary of Liberty
Holdings Ltd ("LHL").
[
5 ] LGL is a long-term insurer in terms of the Long-Term Insurance
Act, No. 52 of 1998. It is a financial services provider which
offers
a range of long-term insurance products and services to both
individuals and corporate clients.
[
6 ] The second primary acquiring firm is the Public Investment
Corporation SOC Ltd ("PIC"), a public company established
in accordance with the Public Investment Corporation Act, No.23 of
2004.The PIC acts in its capacity as the duly authorized
representative
of the Government Employees Pension Fund ("GEPF"),
Unemployment Insurance Fund ("UIF"), and the Compensation
Fund.
[
7 ] The PIC is a registered financial services provider and is the
only asset manager that serves South Africa's public sector.
It takes
care of the investment needs of a number of public sector pension,
provident, social security, development and guardian
funds.
Primary
target firm
[
8 ] The primary target firm is Trans African Concessions (Pty) Ltd
("TRAC"), a company incorporated in accordance with
the
company laws of the Republic of South Africa. TRAC is controlled by
the South Africa Infrastructure Fund Trust ("SAIF").
[
9 ] TRAC is a private concession company incorporated for entering
into a concession contract with the South African National
Roads
Agency Ltd ("SANRAL") relating to the design, construction,
rehabilitation, financing, operation and maintenance
of the highway
which runs from the Solomon Mahlangu interchange on the N4,
approximately 25km east of Pretoria, to Komatipoort
on the South
Africa/Mozambique border and the Mozambican section which begins at
Ressano Garcia on the Mozambique side of the border
and ends at the
entrance to the Maputo harbour for a 30 year period.
Proposed
transaction and rationale
[
10
]
The proposed transaction is as a result of SAIF wishing to dispose of
its shareholding in
three
privately owned concession companies, namely N3
Toll
Concession (Pty) Ltd ("N3TC"), South
African
Toll Road Company (Ply) Ltd
("SATRC"),
and
TRAC.
However,
please note
that the
proposed
transaction
was only in relation
to TRAC.
The SATRC
[1]
and N3TC
[2]
disposals
by SAIF were filed with the Commission as separate
mergers.
[
11
]
The
proposed
transaction
takes
place
in
two
stages.
[3]
In the
first
stage,
LGL
will
increase
its shareholding in TRAC, such that it controls TRAC. Subsequent to
this, in the second stage,
LGL's
shareholding
in TRAC
will be reduced, with the
remaining
shares that were
previously
held by LGL being taken
up by PIG,
such that
PIG will
post-merger exercise control over TRAC.
[
12 ] Broadly, the acquiring firms submits that the proposed
transaction presents an opportunity to retain exposure to TRAC which
amongst other things is envisaged to result in the widening of the
South African market. On the other hand, the primary target
firm
submits that the proposed transaction is as a result of SAIF reaching
its maturity date. As such, SAIF is disposing of its
interests in
accordance with the provisions of the trust.
Impact
on competition
[
13 ] The Commission found that the proposed transaction would result
in a horizontal overlap by virtue of the PIC's shareholding
in N3TC,
another concession company.
However,
given that competition takes place 'for' the market i.e. at the stage
of awarding a concession contract by means of a tender
and not 'in'
the market i.e. at road access level, the Commission was of the view
that the proposed transaction was unlikely to
result in competition
concerns.
[
14 ] Furthermore, the Commission found that the proposed transaction
would not have an effect on the toll rates as TRAC is obligated
to
charge the gazetted toll rates and cannot deviate from or change the
gazetted toll rates.
[
15 ] The Commission therefore concluded that the proposed transaction
was unlikely to substantially prevent or lessen competition
in any
relevant market.
[
16 ] 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
[
17 ] The merging parties confirmed that the proposed transaction will
not have a negative effect on employment and merely involves
a change
at the shareholder/investor level. It will therefore not have an
effect on the day-to-day operations of TRAC. The employees
in TRAC's
concession operations will not be impacted.
[
18 ] The Commission did not receive any concerns related to
employment and found that the proposed transaction was unlikely to
have a negative effect on employment.
[
19 ] The proposed transaction further raised no other public interest
concerns.
Conclusion
[
20 ] 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 transaction. Accordingly we approve the
proposed
transaction unconditionally.
04
July 2016
DATE
________________________
Ms
Yasmin Carrim
Ms
Mondo Mazwai and Ms Andiswa Ndoni concurring
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties: Shawn van der Meulen
from Webber Wentzel representing Liberty Group and SAIF. Kitso
Tlhabanelo from Cliffe Dekker Hofmeyr representing the PIC.
For
the Commission:
Relebohi/e Thabane
[1]
The SATRC transaction was an intermediate merger.
[2]
Please
see
Case
No.
LM021May16
[3]
The
transaction
took place
in
two
stages
as
a
result
of
the
shareholders
agreement and
the
pre
emptive
process
that
the
parties
were
required
to
follow.
See
page
7
of
the
transcript.