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[2017] ZACT 46
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Enx Group Limited v Extract Group Limited (LM082Jun17) [2017] ZACT 46 (4 September 2017)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM104Jul17
In
the matter between
:
Old
Mutual Life Assurance Company
(South
Africa)
Limited
Primary Acquiring
Firm
and
Kagiso
Infrastructure
Empowerment
Fund
Primary Target
Firm
Panel
:
Andiswa
Ndoni
(Presiding
Member)
:
lmraan
Valodia (Tribunal Member)
:
Fiona
Tregenna (Tribunal Member)
Heard
on
: 16 August 2017
Order
Issued on
: 16 August 2017
Reasons
Issued on
: 29 August 2017
Reasons
for Decision
Approval
[1]
On 16 August 2017, the Competition Tribunal ("Tribunal")
approved the proposed transaction between Old Mutual Life
Assurance
Company (South Africa) Lim
i
ted
and Kag
i
so
Infrastructure
Empowerment Fund
.
[
2
]
The reasons for approving the proposed
transaction follow
.
Parties
to proposed transaction
Primary
acquiring firm
[31
The primary acquiring firm is Old Mutual Life Assurance Company
(South Africa) Limited ("OMLACSA"), acting in respect
of
and on behalf of the portfolio of assets called the Ideas Managed
Fund ("Ideas Fund"). OMLACSA is a company incorporated
in
accordance with the laws of the Republic of South Africa.
[41
OMLACSA is a wholly owned subsidiary of Old Mutual Emerging Markets
Limited ("OMEM"), which is controlled by Old Mutual
Group
Holdings (South Africa) ("OMSA"). OMSA is ultimately
controlled by Old Mutual Pie, a firm listed on the London
Stock
Exchange. The abovementioned firms and their subsidiaries will be
referred to as the Acquiring Group.
[5]
OMLACSA controls a number of firms in South Africa, including the
Ideas Fund, which is a linked investment policy product of
OMLACSA. The
Ideas
Fund
is
an
infrastructure equity fund investing in
economic infrastructure (e.g. toll roads, power and gas and rail),
social infrastructure
(e.g. office accommodation and prisons), bonds
and renewable energy (e
.
g.
wind
farms
and solar plants).
[6]
OMLACSA is primarily a provider of long-term insurance products.
African Infrastructure
Investment
Managers (Pty) Ltd ("AIIM")
is
one of the
fund
managers
that form
part
of
the
Acquiring Groups' investment arm
.
AIIM's
investment portfolio includes economic
infrastructure
assets
and
investments
into renewable energy projects. AIIM is the duly authorised
representative and fund manager of the Ideas Fund portfolio
of
assets.
Primary
target firm
[7]
The primary target firm is Kagiso Infrastructure Empowerment Fund
("KIEF")
,
a
trust registered at the office of the Master of the Western Cape High
Court.
[8]
KIEF is a private equity fund managed by the Infrastructure
Empowerment Fund Managers ("IEFM"), with
the
principal objective of
identifying investment opportunities
pertaining to infrastructure and renewable energy projects to be
undertaken in
South
Africa.
Proposed
transaction
[9]
In terms of the proposed transaction, OMLACSA (on behalf of the Ideas
Fund) intends to increase its existing interest by acquiring
the
majority interest in KIEF from the existing participants, thus
acquiring sole control of KIEF. The Liberty Group will be the
only
remaining investor participant.
Rationale
Primary
acquiring firm
[10]
The transaction provides an attractive alternative approach to an
asset level acquisition and will allow OMLACSA to increase
its
exposure in Trans African Concessions (Pty) Ltd ("TRAC")
and South African Toll and Road Company (Pty) Ltd (“SATRC").
Toll Road assets deliver a predictable long term cash flow with
relatively low operation
risk.
Primary
target firm
[11]
The exiting investor participants have elected to exit the
portfolio of infrastructure assets through a disposal of units
in
KIEF to an existing participant in the Fund.
Impact
on competition
[12]
The Commission considered the activities of the merging parties and
found that there was a horizontal overlap in the activities
of the
merging parties in relation to the provision of private equity
investments as they both provide private equity investments.
[13]
The Acquiring Group invests in a diverse portfolio of assets whereas
KIEF invests in economic infrastructure and renewable
energy.
However, the Commission assessed a broad market for the provision of
private equity investments.
[14]
In this market the merged entity will have a market share of less
than 10% with a negligible market share accretion. Further,
the
merged entity will continue to face competition from numerous
competing firms such as Public Investment Corporation, Abraaj
Group,
Actis Africa Limited, Brait Private Equity (Pty) Ltd, Ethos Private
Equity (Pty) Ltd, and DPI (Pty) Ltd, amongst others.
Public
interest
[15]
The merging parties submitted that the proposed transaction will
have no adverse effect on
employment
as KIEF and
the
Ideas Fund have no employees.
[1]
[16]
The Commission was of the view that the proposed transaction is
unlikely to raise concerns on any other public interest grounds.
Conclusion
[17]
In light of the above, we conclude that the proposed transaction is
unlikely to substantially prevent or
lessen
competition
i
n any
relevant
market
or
raise
any
adverse public interest issues
.
Accord
i
ngly,
we approve the proposed transaction unconditionally.
29
Au
g
ust
2017
DATE
_______________________________
Prof.
Fiona
Ms
Andiswa Ndoni and Prof. Fiona Tregenna concurring
Case
Manager:
Kameel Pancham
For
the merging
parties
:
Susan Meyer of Cliffe Dekker Hofmeyr
For
the
Commission:
Zanele Hadebe and Ratshidaho Maphwanya
[1]
Int
er
alia
Commiss
i
on's
Recommendation page 13
.