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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM160Feb20
In the matter between
STANLIB Infrastructure Yield Fund
represented by its general partner
STANLIB Infrastructure GP 2 (Pty) Ltd
Primary Acquiring Firm
And
AFGRI Grain Silo Company (Pty) Ltd Primary Target Firm
Panel : Mr E Daniels (Presiding Member)
: Mr. A Wessels (Tribunal Member)
: Prof. I Valodia (Tribunal Member)
Heard on : 31 March 2020
Order Issued on : 31 March 2020
Reasons Issued on : 30 April 2020
REASONS FOR DECISION
APPROVAL
[1] On 31 March 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger between STANLIB Infrastructure Yield Fund
represented by its general partner STANLIB Infrastructure GP 2 (Pty) Ltd and
AFGRI Grain Silo Company (Pty) Ltd.
[2] The reasons for the approval of the proposed transaction follow.
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PARTIES TO THE PROPOSED TRANSACTION
Primary acquiring firm
[3] The primary acquiring firm is STANLIB Infrastructure Yield Fund (“Stanlib IYF”),
being represented by its general partner STANLIB Infrastructure GP 2 (Pty) Ltd
(“Stanlib GP 2”). Stanlib IYF is ultimately controlled by the Standard Bank
Group Ltd (“Standard Bank”) which is listed on the JSE, but is not controlled by
any firm.
[4] Stanlib IYF is a private equity investment fund that acquires infrastructure
assets with long-term potential.
Primary target firm
[5] The primary target firm is AFGRI Grain Silo Company (Pty) Ltd (“AGS”), a
private company incorporated in South Africa. AGS does not control any firms,
and is not controlled by any firm.
[6] AGS is a grain storage business, comprised of 79 grain silo and bunker storage
facilities located in six provinces, 1 that service farmers and other customers.
These facilities store grains such as maize, wheat, sunflower, soya beans,
barley and sorghum.
BACKGROUND TO THE PROPOSED TRANSACTION
[7] AFGRI Group Holdings (Pty) Ltd (“AGH”) formerly operated its grain storage
business through AFGRI Operations (Pty) Ltd (“AFGRI Operations”), which it
controls. AGH then sought to raise capital by selling its grain storage business.
In order to effect this sale, AGH transferred its grain storage business from
AFGRI Operations to AGS (a special purpose vehicle).2
1 Gauteng, Free State, KwaZulu-Natal, Limpopo, Mpumalanga & the Western Cape.
2 AGS contracted with AFGRI Operations to manage its storage business.
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[8] Various firms subsequently purchased shares in AGS, including Stanlib IYF
whose shareholding prior to the proposed transaction was 24.95%. As per the
AGS memorandum of incorporation (“MOI”), a firm’s shareholding in AGS is
essentially equivalent to the percentage of general voting rights it possesses.
[9] Of relevance to the proposed transaction is another term in the AGS MOI which
states that 75% of the general voting rights are required to pass a reserved
matter. Reserved matters include the approval and amendment of AGS’s
business plan as well as the appointment of the CEO.
[10] Therefore, any firm whose shareholding in AGS is 25% or more would possess
negative control due to its ability to influence AGS policy by a veto vote on
reserved matters.3
PROPOSED TRANSACTION AND RATIONALE
[11] Stanlib IYF (represented by Stanlib GP 2) will acquire an additional 5.05% in
AGS from the sellers, AGH and Izitsalo Employee Investments (Pty) Ltd
(“Izitsalo”).4 Post-merger, Stanlib IYF will have negative control over AGS
through its 30% shareholding.
[12] Stanlib IYF submits that AGS aligns with its investment mandate and acquiring
negative control over AGS provides Stanlib IYF with governance protection.
AGS submits that a potential investor withdrew before the conclusion of a prior
transaction. AGH and Izitsalo retained these shares, which were earmarked for
future sale by a replacement buyer. Stanlib IYF elected to exercise its pre-
emptive right to acquire additional shares in AGS.
3 See Caxton and CTP Publishers and Printers v Media 24 (Pty) Ltd and others
(136/CAC/March2015) paras 46-48.
4 Izitsalo is an employee share scheme which is not controlled by AGH.
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RELEVANT MARKET AND IMPACT ON COMPETITION
[13] The Competition Commission (“Commission”) assessed the activities of the
merging parties and found no horizontal overlaps. This is because neither
Standard Bank nor any of the firms that it controls are involved in the market
for the provision of grain storage.
[14] The Commission found a pre-existing business relationship between Standard
Bank and AGS, with Standard Bank providing financial services to AGS as a
corporate client. The Commission found that this relationship had no bearing
on its assessment of the proposed transaction as the financial services were
far removed from Stanlib IYF.
[15] Due to the above, the Commission concluded that the proposed transaction
was unlikely to substantially lessen or prevent competition in any market. We
found no reason to disagree.
PUBLIC INTEREST
[16] The Commission found that negative employment effects were unlikely as the
merging parties gave an undertaking that no retrenchments would occur as a
result of the proposed transaction.
[17] The Commission noted Izitsalo’s intention to sell a portion of its shares to
Stanlib IYF. As a result, the Commission assessed the proposed transaction’s
effect on promoting a greater spread of ownership by historically disadvantaged
persons and workers in firms in the market as per section 12A(3)(e) of the
Competition Act.5
[18] The Commission found that the shares being sold by both AGH and Izitsalo to
Stanlib IYF were, at all relevant times, held temporarily until a buyer was found.
The proposed transaction is in line with that arrangement.
5 No. 89 of 1998.
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[19] The Commission, therefore, found that the proposed transaction does not result
in a substantially negative effect on the promotion of a greater spread of
ownership by workers.
[20] The Commission found that the proposed transaction was unlikely to raise any
other public interests concerns.
CONCLUSION
[21] In light of the above, we concluded that the proposed transaction was unlikely
to substantially prevent or lessen competition in any relevant market. In
addition, we are of the view that no public interest concerns arise from the
proposed transaction.
[22] Accordingly, we approved the transaction without conditions.
30 April 2020
Mr Enver Daniels Date
Mr A Wessels and Prof. I Valodia concurring
Tribunal Case Manager: P Kumbirai
For the Merging Parties: D Rudman and B Phillips of Webber Wentzel
For the Commission: R Darji