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[2018] ZACT 72
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African Rainbow Capital Financial Services Holdings (Pty) Ltd v Commonwealth Bank Of South Africa (Holding Company) Limited (LM161Aug18) [2018] ZACT 72 (15 November 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM161Aug18
In
the matter between:
AFRICAN
RAINBOW CAPITAL FINANCIAL SERVICES
Acquiring Firm
HOLDINGS
(PTY) LTD
And
COMMONWEALTH
BANK OF SOUTH AFRICA (HOLDING
Target Firm
COMPANY)
LIMITED
Panel
: Enver Daniels (Presiding Member)
: Mondo Mazwai (Tribunal Member)
: Fiona Tregenna (Tribunal
Member)
Heard
on
: 24 October 2018
Order
Issued on : 24 October 2018
Reasons
Issued on : 15 November 2018
Reasons
for Decision
APPROVAL
[1]
On
28 October 2018, the Competition Tribunal approved a large merger
between African Rainbow Capital Financial Services Holdings
("ARC
Finholdco") and Commonwealth Bank of South Africa (Holding
Company) Limited ("CBSA Holdco").
[2]
The
reasons for the approval follow.
PARTIES
TO THE TRANSACTION AND THEIR ACTIVITIES
Primary
Acquiring Firm
[3]
ARC
Finholdco is a company incorporated in accordance with the Company
laws of the Republic of South Africa. It is directly controlled
by
African Rainbow Capital (Pty) Ltd ("ARC"), which is in
turn, wholly owned by Ubuntu-Botho investments. ARC additionally
holds a 51% share in African Rainbow Investments Limited. The
remaining 49% of which is held by public shareholders. Relevant to
the proposed transaction, ARC Finholdco controls ARC lmali-Madi (RF)
Ltd ("ARC lmali-Madi").
[4]
As
ARC Investments, ARC Finholdco, and ARC lmali-Madi are ultimately
controlled by ARC, they will be collectively referred to as
the
'acquiring group'.
[5]
The
acquiring group is active in the financial services sector, within
which it controls many firms across a wide range of industries.
Its
investment portfolio is comprised of insurance brokerage, healthcare
administration businesses, equity brokerage, risk management,
investment management services and research and broking businesses.
Primary
Target Firm
[6]
CBSA
Holdco is a company incorporated in accordance with the laws of South
Africa which is controlled by Commonwealth Bank of Australia
(CBA),
which holds 90% of its shares. The remaining 10% is held by ARC
lmali-Madi. CBSA Holdco wholly controls Tyme Technical Solutions
("TTS") and the Commonwealth Bank of South Africa ("CBSA").
[7]
CBSA
and TTS jointly operate as a digital bank trading under the name TYME
Digital Bank. Tyme Bank currently provides a range of
banking
services, with a primary focus on money transfers available at Pick n
Pay stores.
[1]
PROPOSED
TRANSACTION AND RATIONALE
[8]
The
proposed transaction involves an acquisition by ARC Finholdco of 90%
of the share capital in CBSA Holdco from CBA. Thereafter
ARC
lmali-Mali will distribute its shareholding in CBSA Holdco to ARC
Finholdco. At the completion of the transaction, ARC Finholdco
will
wholly own and control CBSA Holdco.
[9]
In
terms of rationale, the acquiring group submitted that it intends to
facilitate CBSA bringing to the market a retail and transactional
banking offering targeted at lower income consumers and small and
micro businesses which are currently unbanked and/ or underbanked
completely. It submitted that its overall objective is to promote
financial inclusion of South Africans currently being excluded
from
the traditional banking market.
[10] CBA, the seller,
submitted that it has taken the decision to exit the South African
Market and that
this transaction presented an alternative to shutting
down CBSA.
RELEVANT
MARKETS AND IMPACT ON COMPETITION
[11]
The
Commission considered the activities of the merging parties and found
that the proposed merger raised a horizontal overlap only
insofar as
the acquiring group currently holds a shareholding in CBSA.
[12]
The
Commission therefore concluded that the transaction raised no
horizontal nor vertical concerns and that it would therefore not
lead
to a substantial prevention or lessening of competition.
[13]
We
find no reason to disagree.
PUBLIC
INTEREST
[14]
The
merging parties submitted that no employees would be retrenched as a
result of the proposed transaction.
[15]
The
Commission additionally found that the merger would facilitate the
entry of a new bank in the banking industry. It submitted
that the
proposed merger would have a positive impact on the banking industry
as well as the ability of firms owned and controlled
by historically
disadvantaged individuals.
NOTIFICATION
TO THE MINISTER
[16]
The
Commission, in accordance with Rule 36(1) of the Rules for the
Conduct of Proceedings in the Competition Commission, sent the
Minister of Finance a copy of the merger notice, and all documents
filed in respect of the merger. The minister did not file a
form
CC5(3) form indicating an intent to participate, nor did he send an
acknowledgement of receipt.
[17]
The
Commission sent out a second letter to the Minister of Finance. To
date the Commission has not received any notice of intention
to
participate from the Minister.
[18]
At
the hearing, the Commission was questioned as to the steps it had
taken to obtain the views of the Minister. Its response was
that no
further action had been taken other than mailing the Minister.
[19]
Whilst
the issue did not cause a delay in the Tribunal's approval of the
merger in question, the Commission may be wise to take
steps to
ensure that their notifications have been noted.
CONCLUSION
[20]
The
proposed transaction does not lead to a substantial prevention or
lessening of competition.
[21]
The
proposed transaction does not raise any public interest concerns.
[22]
Accordingly,
the transaction was approved without conditions.
Enver
Daniels
Prof. Fiona Tregenna and Mrs Mondo Mazwai
concurring.
15 November 2018
Date
Tribunal
Researcher
: Alistair Dey-Van Heerden
For
the merging parties : Werner Rysbergen
of Webber Wentzel and Mark
Griffiths of Norton Rose Fulbright
For
the Commission
: Nonhlanhla Msiza and Mogau Aphane
[1]
Tyme's further offerings include a financial wellness platform, and
an advance against future sales service.