Approval
1. On 11 March 2020, the Competition Tribunal unconditionally approved a proposed
merger transaction whereby RH Bophelo Operating Company (Pty) Ltd intends to
acquire control of Rondebosch Medical Centre and Rondebosch Medical Centre
Hospital Property.
2. The reasons for our approval follow.
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM154Feb20
In the matter between:
RH Bophelo Operating Company (Pty) Ltd Primary Acquiring Firm
And
Perthpark Properties in respect of the Shares and
Claims in Rondebosch Medical Centre (Pty) Ltd and
Broadcount Investments (Pty) Ltd in respect of
property known as Rondebosch Medical Centre
Hospital Property
Primary Target Firm
Panel: Ms Mondo Mazwai (Presiding Member)
Prof. Imraan Valodia (Tribunal Member)
Prof. Fiona Tregenna (Tribunal Member)
Heard on: 11 March 2020
Order Issued on: 11 March 2020
Reasons Issued on: 14 April 2020
REASONS FOR DECISION
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It
competitiontribunal
SOUTH AFRICA
Parties to the transaction
Primary Acquiring Firm
3. RH Bophelo Operating Company (Pty) Ltd (“RH Bophelo”) is a listed company that
holds various equity interests in a number of private hospitals which are located in
the North West and Gauteng Provinces. It also has a sole interest in a medical
operating management, services and facilities company which operates and
manages three hospital facilities. Two of these hospital facilities are located in the
Free State and one is in Gauteng. RH Bophelo also manages a number of medical
facilities in the North West and in Mpumalanga.
4. The Public Investment Corporation (“PIC”) controls RH Bophelo.
Primary Target Firm
5. The Rondebosch Medical Centre (“RMC”) provides acute hospital services which
include medical services, paediatric services, intensive care services and
maternity services.
6. The Rondebosch Medical Centre Hospital Property (“Hospital Property”)
comprises a collective gross leasable area (GLA) of 17 700m 2. RMC is located
on this property.
7. RMC already holds a 30% shareholding in RH Bophelo. The remainder of the
shares are held by Perthpark Properties and other minority shareholders.
Proposed transaction
8. The proposed transaction entails RH Bophelo increasing its 30% shareholding in
RMC to a 100% shareholding; and the acquisition of ownership and control over
the Hospital Property.
9. In 2008, RH Bophelo acquired a 30% shareholding in RMC with an option to
increase its shareholding by a certain percentage within four years after the
acquisition of the 30% shareholding. RH Bophelo therefore wishes to offer to
exercise its option and to acquire an additional stake in RMC, the Hospital
Property, and RMC Pharmacy.
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10. In terms of the proposed transaction, RH Bophelo will acquire (i) the remaining
70% shareholding and loan claims in RMC; (ii) sole control of the Hospital
Property, and (iii) the entire share and claims for RMC Pharmacy through RMC.
Upon implementation of the proposed transaction, RH Bophelo will exercise
direct control over RMC and the Hospital Property; and indirect control over the
RMC Pharmacy though RMC.
11. RH Bophelo submitted that the proposed transaction will, inter alia, bolster RH
Bophelo’s asset base in the Western Cape Province and in line with its mandate,
provide affordable private hospital costs. RMC submitted that in a market
dominated by three large hospital groups, RH Bophelo provides a platform for 1
stand-alone BEE hospitals such as RMC to join, which allows for, inter alia,
access to capital for the growth and expansion of services offered by RMC and
synergies between RMC and other private hospitals.
Competition Assessment
12. The Commission found that there was a horizontal overlap in the activities of the
parties in the provision of acute multidisciplinary inpatient private hospital
services; and considered this to be the relevant product market.
13. It found however that there was no geographic overlap in the activities of the
merging parties since none of the hospitals in which the acquiring group
(including the PIC) has a controlling interest, are located in the Western Cape.
14. In the national market (for the provision of acute multidisciplinary inpatient
hospital services), the Commission found that hospitals compete on price and
non-price factors. RH Bophelo’s hospitals and RMC are part of the National
Hospital Network (“NHN”) and negotiate tariffs on their behalf and other
independent hospital groups. The Commission was of the view that the proposed
transaction was unlikely to result in tariff changes at RMC.
15. At the hearing the merging parties confirmed that there would be no changes to
15. At the hearing the merging parties confirmed that there would be no changes to
tariff negotiations through the NHN (at a national level), and that there may be
some synergies in procurement. 2
These are Netcare Limited, Mediclinic Southern Africa, and Life Healthcare group Holdings Limited.1
Transcript p7 lines 9-16 and p8 lines 10-182
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16. For the reasons above, we were satisfied that the proposed transaction was
unlikely to substantially prevent or lessen competition in the relevant market.
Public interest
17. The merging parties submitted that no job losses will occur as a result of the
proposed transaction. Employees were notified of the transaction and no
concerns were raised.
18. No other public interest issues arise from the proposed transaction.
Conclusion
19. In view of the above, we were satisfied that the proposed transaction was unlikely
to substantially prevent or lessen competition in any relevant market. In addition,
the proposed transaction will not result in job losses or have adverse effects on
any other public interest issues.
20. We therefore approved the proposed transaction without conditions.
14 April 2020
Ms Mondo Mazwai Date
Prof. Fiona Tregenna and Prof. Imraan Valodia concurring
Tribunal Case Manager: Ndumiso Ndlovu
For the Merging Parties: P Bodlo of Motsoeneng Bill Attorneys Inc.
For the Commission: S Moshoma and R Maphwanya
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