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[2019] ZACT 80
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Old Mutual Life Assurance Company (South Africa) Ltd v African Infrastructure Investment Fund (LM088Aug19) [2019] ZACT 80 (3 December 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM088Aug19
In the
matter between:
Old
Mutual Life Assurance Company (South Africa)
Ltd
(acting in respect and on behalf of the portfolio
of
assets called the IDEAS Managed
Fund)
Primary Acquiring Firm
and
African
Infrastructure Investment
Fund
Primary Target Firm
Panel
: Enver Daniels (Presiding Member)
Yasmin Carrim (Tribunal Member)
Anton Roskam (Tribunal Member)
Heard
on
: 6 November
2019
Order
Issued on : 6 November 2019
Reasons
Issued on : 3 December 2019
Reasons
for Decision
Approval
[1]
On
6 November 2019, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction between Old
Mutual
Life Assurance Company (South Africa) Ltd ("OMLACSA"),
acting in respect and on behalf of the portfolio of assets
called the
IDEAS Managed Fund ("IDEAS Fund"), and African
Infrastructure Investment Fund ("AIIF").
[2]
The
reasons for the unconditional approval follow.
Parties to proposed transaction
Primary acquiring firm
[3]
The
primary acquiring firm is OMLACSA acting in respect and on behalf of
the portfolio of assets called the IDEAS Fund. OMLACSA
is a public
company incorporated in accordance with the laws of South Africa.
[4]
OMLACSA
is a wholly owned subsidiary of Old Mutual Emerging Markets (Pty) Ltd
("OMEM"), which is ultimately controlled
by Old Mutual Ltd
("OM").
[5]
The
IDEAS Fund is an infrastructure equity fund, managed by African
Infrastructure Investment Managers (Pty) Ltd ("AIIM").
[6]
OMLACSA is a registered long-term insurer authorized to
provide,
inter alia,
assistance; disability; health; and life
policies. In addition, OMLACSA provides retirement fund
administration services.
[7]
The
IDEAS Fund is an infrastructure equity fund, managed by AIIM, which
invests in economic infrastructure, social infrastructure
and
renewable energy infrastructure. Relevant for purposes of the
proposed transaction is the renewable energy portfolio of the
IDEAS
Fund. The portfolio consists of solar, wind and hydro technology in
the Western Cape, Northern Cape, Eastern Cape and the
Free State
Provinces.
[8]
OMLACSA
and all its associated firms and subsidiaries are, hereafter,
collectively referred to as the Acquiring Group.
Primary target firm
[9]
The primary target firm is AIIF, a vesting trust established
for the purpose of undertaking equity investments in African
infrastructure
projects. OMLACSA holds a 31.82% participating
interest in AIIF.
[10] The AIIF fund manager
responsible for the management of the portfolio of assets and
business of AIIF
is AIIM. AIIM does not, however, control AIIF.
[11]
AIIF
is a private equity infrastructure investment fund which invests
predominantly in toll road assets and renewable energy. AIIF
currently owns and controls Umoya Energy (RF) (Pty) ltd (Umoya) and
has a non-controlling minority interest in Trans African Concessions
(Pty) Ltd (TRAC) and N3 Toll Concession (RF) (Pty) Ltd (N3 Toll).
[12]
Relevant
for purposes of the proposed transaction are Umoya's commercial
operations in terms of its 20-year Power Purchase Agreement
("PPA")
with Eskom.
[1]
Umoya was established to finance and establish the Hopefield Wind
Farm Project, situated in the Western Cape.
Proposed transaction and rationale
[13]
The
IDEAS Fund will acquire 100% of the participation units in AIIF from
All F's investors. OMLACSA will increase its existing shareholding
in
AIIF from 31.82% to 81.06%. Upon implementation, the Acquiring Group
will exercise sole control of AIIF.
[14]
From
the perspective of the Acquiring Group, the proposed transaction is
an attractive alternative approach to an asset level acquisition
and
will allow the Acquiring Group to increase its exposure in TRAC, N3
Toll and Umoya. Furthermore, TRAC, N3 Toll and Umoya constitute
attractive assets already within the IDEAS Fund's portfolio.
[15]
The
Exiting Unit Participants ("the sellers") seek to dispose
of their respective interests in the fund and gain liquidity.
Impact on competition
[16]
The
Commission considered the activities of the parties to the proposed
transaction and found that it raises a horizontal overlap
in the
provision of private equity funds/investments and the production of
renewable energy.
[17]
In
its assessment of the national market for the provision of private
equity funds/investments, the Commission found that the merged
entity
will have an estimated post-merger market share of approximately
8.10%, with an accretion of 0.28%. In view of the merged
entity's low
market share-and share accretion, the Commission concluded that the
proposed transaction is unlikely to lead to the
substantial lessening
of competition.
[18]
The
Commission further assessed the national market for the provision of
renewable wind energy and found that the merged entity
will have an
estimated post-merger market share of 9.21% with an accretion of
1.98%. Umoya has contracted its entire capacity to
Eskom in terms of
a twenty-year PPA. The electricity generated by Umoya is supplied to
the national grid. Eskom has entered into
PPAs with more than 65
producers who will continue to supply renewable energy until the year
2030. According to the Commission,
the proposed transaction does not
materially change the structure of the market.
[19]
Insofar
as the PPA is concerned, Eskom predetermines the prices and the
capacities in the market. These values do not fluctuate.
The
Commission therefore concluded that the proposed transaction is
unlikely to lead to substantial lessening or prevention of
competition in this market.
[20]
We
found no reason to disagree.
Public interest
[21]
The
merging parties submitted that no retrenchments or job losses will
result from the proposed transaction.
[22]
Furthermore,
no public interest concerns are expected to arise as a result of the
proposed transaction.
Conclusion
[23]
In
light of the above, we concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in
any
relevant market. In addition, the proposed transaction raises no
public interest concerns. Accordingly, we approve the proposed
transaction unconditionally.
Mr.
Enver Daniels
Ms Yasmin Carrim and Mr. Anton Roskam concurring
3
December 2019
DATE
Case
Manager:
Helena Graham
For
the merging parties: Nazeera Mia of
Cliffe Dekker Hofmeyr
For
the Commission:
Nonhlanhla Msiza and Mogau Aphane
[1]
Umoya selected as a preferred bidder by the Department of Energy's
Renewable Energy Independent Power Producer Procurement Programme
("REIPPP").