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[2018] ZACT 7
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Ethos Private Equity Fund VI v RTT Holdings (Pty) Ltd (LM250Dec17) [2018] ZACT 7 (6 February 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM250Dec17
In
the matter between
Ethos
Private Equity Fund
VI
Primary
Acquiring Firm
And
RTT Holdings (Pty)
Ltd
Primary Target
Firm
Panel
: Mr Norman Manoim (Presiding Member)
: Mr Andreas Wessels (Tribunal
Member)
: Prof. lmraan Valodia (Tribunal
Member)
Heard
on
: 15 January 2018 Order
Issued
on
: 15 January 2018 Reasons
Issued
on
: 6 February 2018
REASONS
FOR DECISION
Approval
[1]
On
15 January 2018, the Tribunal unconditionally approved the
transaction between Ethos Private Equity Fund VI ("Ethos Fund
VI") and RTT Holdings (Pty) Ltd ("RTT"), hereinafter
referred to as the merging parties.
[2]
The
reasons for the proposed transaction follow.
Parties
to the transaction
Primary
Acquiring Firm
[3]
Ethos
Fund VI is a private equity investment fund that invests in medium to
large sized companies throughout the Republic of
South Africa
and Sub-Saharan Africa. It comprises of Ethos Capital VI GP (Jersey)
Limited, Ethos Capital Vt GP (SA) (Pty) Ltd,
and the trustees of
Ethos Fund VI Co-Investment. Ethos Fund VI is advised by Ethos
Private Equity (Ply) Ltd on investments and
facilitates the
acquisition by investors (local and foreign) of equity interests in
management buyouts. Ethos Fund Vi's controllers
and subsidiaries are
hereinafter referred to as the "Acquiring group".
[4]
The
Acquiring group engages in the business of managing private equity
funds from multiple domestic and foreign investors.
Primary
Target Firm
[5]
RTT
is jointly controlled by a consortium of firms and wholly controls
three other firms.
[6]
Ethos
Fund VI already holds a joint controlling interest of 44.96% in RTT.
RTT's controllers and subsidiaries are hereinafter referred
to as the
"Target group".
[7]
The
Target group is engaged in various business ventures which comprise
of IT driven solutions, secure transportation, warehousing
and
distribution, and other value-added services. It serves several South
African industries,
inter alia,
telecommunication, technology and
healthcare.
Proposed
transaction and rationale
[8]
In
terms of the Subscription and Recapitalization Agreement, the
proposed transaction entails a change from joint to sole control
through an acquisition of shares. Ethos Fund VI will acquire an
additional 9.39% of the issued share capital in RTT. Post-merger,
Ethos Fund VI will hold a sole controlling interest of 54.35% in RTT
and its subsidiaries.
[9]
The
merging parties submitted that RTI has experienced a decline in
earnings and has been pressured to restructure Its balance sheet.
As
such, RTT shareholders agreed to recapitalise the RTI group. By
virtue of the recapitalization, and the fact that certain loans
are
not held proportionately by all RTT shareholders, Ethos Fund VI will
cross the so-called
bright line
to
acquire sole control.
Relevant
market and impact on competition
[10]
The
Commission considered the activities of the merging parties and found
that the proposed transaction does not result in any horizontal
overlaps, as the Acquiring group does not have any interests in the
firms that conduct business in warehousing, transportation
and
distribution, save for Ethos Fund Vi's pre-merger shareholding in
RTT. The competitive landscape of the market at present will
remain
unaltered as the proposed transaction simply entails a change in
control as a result of an increased shareholding by Ethos
Fund VI in
RTT.
[11] In
light of the above, the Commission was of the view that the proposed
transaction is unlikely to
substantially prevent or lessen
competition in any market. We accordingly agreed with the
Commission's analysis.
Public
interest
[12] The
merging parties submitted that the proposed transaction will not
result in any adverse effects
on employment as no retrenchments were
contemplated. Ethos Fund VI does not have any employees and the
proposed transaction
will not impact RTT's day-to-day operations. The
Commission noted that no concerns were raised by employees of RTT and
thus was
of the view that the proposed transaction does not raise any
employment or any other public interest concerns.
Conclusion
[13] In
light of the above, we concluded that the proposed transaction is
unlikely to substantially prevent
or lessen competition in any
market. In addition, no other public interest issues arise from the
proposed transaction. Accordingly,
we approved the proposed
transaction unconditionally.
Mr
Norman Manoim.
6 February 2018
Mr
Andreas Wessels and Prof. lmraan Valodia concurring.
Tribunal Case
Manager
: Ndumiso
Ndlovu and Kgothatso Kgobe.
For
the Merging Parties
: S van
der Meulen of Webber Wentzel.
For
the Commission
: S Gumede.