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[2019] ZACT 32
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Absa Bank Limited v Custody, trustee and derivatives clearing business of Societe Generale S.A Johannesburg branch and global custody services performed via foreign sub-custodians (LM021May19) [2019] ZACT 32 (28 June 2019)
COMPETITION TRIBUNAL OF
SOUTH AFRICA
Case
No: LM021May19
In
the matter between
Absa
Bank
Limited
Primary Acquiring Firm
And
The
custody, trustee and derivatives
clearing
Primary Target Firm
business of Societe
Generale S.A Johannesburg
branch and global custody
services performed
via foreign
sub-custodians
Panel
: Norman Manoim (Presiding Member)
:
Mondo Mazwai (Tribunal Member)
:
Medi Mokuena (Tribunal Member)
Heard
on: 12 June 2019
Order
Issued on: 12 June 2019
Reasons
Issued on : 28 June 2019
REASONS FOR DECISION
Approval
[1]
On 12 June 2019, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction involving Absa
Bank
Limited ("Absa") and the custody, trustee and derivatives
clearing business of Societe Generale S.A ("SocGen")
Johannesburg branch and global custody services performed via foreign
sub custodians ("Target Assets"), hereinafter
collectively referred to as merging parties.
[2]
The reasons for the approval of the proposed transaction
follow.
Parties
to the transaction
Primary
Acquiring Firm
[3]
Absa is a wholly owned subsidiary of Absa Group Ltd ("Absa
Group"). The shares in Absa Group are widely dispersed and as
such no single shareholder controls Absa Group. Absa Group and Absa
collectively control a number of firms in South Africa.
[4]
Absa is listed as a regional African banking and insurance
business. It offers a complete range of retail, business, corporate
and
investment banking products. Absa also provides derivatives
clearing and services in relation to its own trading activities.
Primary
Target Firm
[5]
SocGen is a public company incorporated in accordance with
laws of France. SocGen is listed on the Euronext Paris Exchange and
is
not controlled by any single shareholder. SocGen controls the
Target Assets and two firms namely Societe Generale South African
Nominees (Pty) Ltd and Goudstad Nominees (Pty) Ltd, hereinafter
collectively referred to as the "Nominee Companies".
[6]
In terms of the custody services, the services include
safekeeping and securities; settlement; corporate action; withholding
tax;
reporting and reconciliation; foreign exchange services for
major currencies; payment processing and cash account management. In
South Africa, the services are primarily provided to financial
institutions.
[7]
The trustee business provides trustee services to fund
managers and administrators; as well as compliance with investment
funds
policies. The derivates clearing services involve the clearing
of trades in respect of listed derivatives. The Nominee Companies
hold the securities and/or the interest in securities for clients.
Proposed
transaction
[8]
In terms of the
Sale
of
Business
Agreement,
Absa will acquire the Target Assets and the Nominee
Companies from SocGen. Post-merger, Absa will own and control the
Target Assets
and Nominee Companies.
Impact on competition
[9]
The Competition Commission ("Commission") considered
the activities of the merging parties and identified a horizontal
overlap in the national market for the provision of (i) equity
derivatives clearing services, (ii) currency derivatives clearing
services and (iii) interest rate derivatives clearing services. The
Commission also assessed the broader market for the provision
of
derivatives clearing services.
[10]
In its investigation, the Commission found that the merged entity
will have combined post-merger market shares of less than
20%, 30%
and 15% in each of the respective relevant markets. In terms of the
market share accretions, they are all
de minimis.
[11]
In the broader market for the provision of derivatives clearing
services, the Commission found that the merged entity will
have a
combined post-merger market share of less than 20%, with an accretion
of less than 5%.
[12]
The Commission was of the view that the proposed transaction is
unlikely to raise competition concerns as the market share
accretions
are relatively low. Further, the merged entity will continue to face
competitive constraints from other market participants
such as
Standard Bank, RMB Bank and Nedbank.
[13]
Given the above, the Commission concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition
in any relevant market. We see no reason to differ from
this conclusion.
Public
interest
[14]
The merging parties confirmed that the proposed transaction will not
have any negative effects on employment in South Africa.
[15]
The proposed transaction raises no other public interest concerns.
Conclusion
[16]
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 concerns arise from
the proposed transaction. Accordingly, we approve the
proposed
transaction unconditionally.
______________________
Mr
Norman Manoim
Ms
Mondo Mazwai and Mrs Medi Mokuena concurring.
28
June 2019
Date
Tribunal
Researcher:
Hlumelo Vazi
For
the merging parties: A Roets of Nortons Inc
and I Dhladhla of Absa Group Limited.
For
the Commission
N Msiza and M Aphane