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[2018] ZACT 38
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Ethos Healthcare Investments (Pty) Ltd v Murray & Main Street 1574 (Pty) Ltd (LM263Jan18) [2018] ZACT 38 (8 March 2018)
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM263Jan18
In
the matter between
ETHOS
HEALTHCARE INVESTMENTS (PTY)
LTD
Acquiring Firm
And
MAIN STREET 1574 (PTY)
LTD
Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Andiswa Ndoni (Tribunal Member)
: Medi Mokuena (Tribunal Member)
Heard
:
7 February 2018
Last
submissions received : 7 February 2018
Order
issued
: 8 February 2018
Reasons
issued
: 8 March 2018
REASONS FOR DECISION
Approval
[1]
On
7 February 2018, the Competition Tribunal approved the large merger
between Ethos Healthcare Investments (Pty) Ltd ("Ethos
Healthcare") and Main Street 1574 (Pty) Ltd ("Holdco")
without conditions.
[2]
The
reasons for the approval follow.
Parties to the transaction and their
activities
Primary
Acquiring Firm
[3]
The
primary acquiring firm is Ethos Healthcare, an entity newly
established by Ethos Private Equity (Pty} ltd ("Ethos")
for
the purpose of making investments in the healthcare sector. The
majority of shares in Ethos Healthcare will be ultimately held
by
Ethos Fund VII ("Fund 7"), an
en
commandite
partnership, with Ethos
serving as its discretionary investment manager.
[1]
[4]
Ethos
is an authorised discretionary financial services provider to a
number of private equity funds, which, in turn, have shareholding
in
number of entities. None of which are active in the provision of
healthcare or healthcare related services.
[5]
Ethos
Healthcare will replicate Fund 7's investment structure save for the
fact that it will have a corporate rather than limited
partnership
form. Ethos will manage Ethos Healthcare, providing portfolio
management and administrative services such as structuring
and
negotiating proposed investments, monitoring the performance of
investments and acquiring and disposing of such on behalf of
Ethos
Healthcare regardless of the identity of funders. Ethos may thus be
seen to control Fund 7 and Ethos Healthcare as contemplated
in
s12(2)(g)
of the
Competition Act 89 of 1998
.
[6]
It
was submitted by the merging parties that the focus of Ethos
Healthcare would be the investment in the broad healthcare sector
within primarily South, Southern, and sub-Saharan Africa.
Primary Target Firm
[7]
The
primary target firm is Holdco, an entity established for the purpose
of the internal restructure of Amayeza Abantu Bio Medical
(Pty) Ltd
("Amayeza"). As a result of the internal restructuring,
Holdco will control the Amayeza business which includes
shareholding
in Amayeza's subsidiaries.
[2]
[8]
The
Amayeza business provides medical technology solutions. Specifically,
it distributes medical technology products in South and
Southern
Africa which are used in a number of specialisations.
[3]
Amayeza is the appointed distributor for various multinational
medical technology manufacturers but does not manufacture any
products.
[4]
Proposed
transaction and rationale
[9]
In
terms of the Sale of Shares and Subscription Agreement Ethos, through
Ethos Healthcare will acquire control of the business of
Amayeza
which include the entire distribution business conducted by Amayeza,
including its liabilities by purchasing 100% of the
shareholding in
Holdco.
[10]
Post-transaction, Ethos Healthcare will control the business of
Amayeza.
[11]
In
terms of rationale, the acquiring firm submits that the proposed
transaction represents an attractive private equity investment
opportunity with Amayeza presenting a strong position in terms of
products and services within a high growth market.
[12]
The
target firm indicates that the proposed transaction presents an
opportunity for investment in the Amayeza business, which will
realise additional capital and business expertise and hopefully will
facilitate further growth and expansion for the target.
Relevant market and
impact on competition
[13]
The
Commission found that the proposed transaction does not result in a
horizontal overlap as no firm within the Ethos Group provides
or has
interests in businesses that provide medical products and/or
services. Additionally, the Commission found that there is
no
business relationship between the merging parties in South Africa. It
thus concluded that the transaction is unlikely to substantially
prevent or lessen competition in South Africa. We see no reason to
differ.
Public
interest
[14]
The
proposed transaction will not have a negative effect on employment
because the target firms will continue to operate as is post-merger.
The proposed transaction further raised no other public interest
concerns.
Conclusion
[15]
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.
Ms
Yasmin Carrim
Ms
Andiswa Ndoni and Mrs Medi Mokuena concurring
08 March 2018
Tribunal
Researcher:
Alistair Dey-van Heerden
For
the merging parties: Robert Wilson of Webber
Wentzel
For
the Commission:
Rethabile Ncheche and Zanele Hadebe
[1]
At the time of notification, the parties were unsure as to which
private equity fund would command the shares in Ethos Healthcare.
At
the merger hearing and in a further submission requested by the
Tribunal, the Merging parties confirmed that the private equity
fund
holding shares in Ethos Healthcare would be Fund 7.
[2]
The subsidiaries and respective shareholdings are: Main Street 1570
(Pty) Ltd (100%); Amayeza Spine (Pty) Ltd (100%) Silvocure
(Ply) ltd
(100%) Mission Point Trading 95 (Pty) Ltd, Trading as Legacy Medical
(62.3%), and Ameka Health (Ply) ltd (49%).
[3]
Namely e1ectrophysiology, neuromodulation, woundcare, cardiology,
cardiac rhythm management, structural heart management, and
spinal
care.
[4]
Amayeza is the appointed distributor for firms such as Abott
Laboratories, Terumo Corporation, K2M incorporated, LivaNova PLC.,
Global Vegal Nerve Stimulation and Tricumed.