COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM065May18
In the matter between
GroCapital Holdings (Pty) Ltd Primary Acquiring Firm
And
South African Bank of Athens Ltd Primary Target Firm
Panel : Mr Norman Manoim (Presiding Member)
: Mrs Medi Mokuena (Tribunal Member)
: Ms Andiswa Ndoni (Tribunal Member)
Heard on : 12 September 2018
Order Issued on : 12 September 2018
Reasons Issued on : 21 September 2018
REASONS FOR DECISION
Approval
[1] On 12 September 2018, the Competition Tribunal ("the Tribunal") conditionally
approved the large merger between GroCapital Holdings (Pty) Ltd
("GroCapital")and South African Bank of Athens Limited ("SABA").
[2] The reasons for the approval follow.
Parties to the transaction and their activities
Primary acquiring firm
[3] GroCapital is jointly owned and controlled by: AFGRI Holdings (Pty) Ltd
("AFGRI"), Fairfax Africa Investment (Pty) Ltd ("Fairfax Africa") and The Public
Investment Corporation (SOC) Ltd ("PIC"). AFGRI and Fairfax Africa are both
ultimately owned by Fairfax Financial Holdings Ltd, a public Canadian
investment company.
[4] GroCapital provides financial services to businesses involved in the
agricultural value chain and is one of a number agriculture commodity related
companies owned by AFGRl, collectively referred to as the AFGRI Group.
Primary target firm
[5] The primary target firm is SABA, a banking services provider to clients in
various industries. SABA is owned and controlled by the National Bank of
Greece ("NBG").
Proposed transaction and rationale
[6] In terms of the proposed transaction, GroCapital will acquire the majority of
SABA's share capital from NBG and make a mandatory offer, in terms of s123
of the Companies Act, for all other outstanding shares. Post-transaction,
SABA will be solely controlled by GroCapital.
[7] In August 2017, the Tribunal unconditionally approved essentially the same
transaction between GroCapital and SABA.1 However, the Merging Parties
were thereafter advised by the South African Reserve Bank ("SARB") that it
would enhance their application for regulatory approval if they included the
PIC as a shareholder of GroCapital. The Merging Parties thus restructured the
acquiring group and re -notified this transaction to the Commission following
SARB approval. Hence the only difference between the two transactions is the
inclusion of PIC as a part-owner of the acquiring firm.
[8] AFGRI submits that the transaction allows it to grow its financial services
offering by acquiring an entity with a banking licence. NBG submitted that the
disposal is a result of Greece's financial situation that has constrained capital
conditions and redu ced growth. The PIC is looking to maximise returns on
investment in a new banking entity.
1 GroCapital Holdings (Pty) Ltd And South African Bank of Athens Ltd LM077Jun17
Relevant market and impact on competition
[9] In the previously approved transaction, the Commission assessed the
horizontal and vertical overlaps that arose between the AFGRI Group and
SABA. It was found that these overlaps would be unlikely to substantially
prevent or lessen competition in the relevant markets .2 These overlaps were
not evaluated again in the present transaction.
Information exchange and cross-directorship concerns
[10] As a result of the PlC's interests in various South African banking service
providers, the Commission evaluated potential co-ordinated effects in the
broad market for the provision of banking services. The Commission found
that some of the PIC's interests grant it access to confidential information and
the ability to appoint members onto the board of directors of the relevant
banking entities. Post-transaction, the PIC will also be able to influence
operations and appoint directors of GroCapital, the sole controller of SABA.
[11] The PIC as a mutual shareholder thus represents a potential platform for
sharing of sensitive information and a mechanism to facilitate collusion
between competing banking service providers. To address these concerns,
the merging parties have agreed that the PIC will not appoint any person onto
the board of GroCapital or SABA who is, or has been in the preceding six
months, a member of the board of a competing banking service provider.
Further, the PJC will ensure measures are in place to prevent the exchange of
sensitive information, including confidentiality undertakings by representatives
on the GroCapital and SABA boards.
[12] We are satisfied that the imposed conditions adequately address any
concerns relating to information exchange and cross directorships between
competitors.
Public interest
[13] The Merging Parties submit that the proposed transaction will not result in any
2 LM007Jun17, Para 12
job losses. 3 All relevant employee representatives were contacted by the
Commission and no concerns were raised. The Commission was satisfied that
the proposed transaction is u nlikely have a negative impact on employment or
raise any other public interest concerns.
Conclusion
[14] In light of the above, we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition in any relevant market and that
any potential co -ordination concerns are adequately addressed by the
conditions. In addition, no public interest issues arise from the proposed
transaction. Accordingly, we approve the proposed transaction subject to the
conditions attached hereto as 'Annexure A'.
Mr Norman Manoim
Mrs Medi Mokuena and Ms Andiswa Ndoni
21 September 2018
Date
Tribunal Researcher: Jonathan Thomson
For the merging parties Andries Le Grange of Cliffe Dekker Hofmeyr Inc
For the Commission: Billy Mabatamela
3 Paragraph 8, page 47 of the Commission’s Record.