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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM039Jun20
In the matter between
Investec Bank Ltd Primary Acquiring Firm
And
Omwieco (Pty) Ltd Primary Target Firm
Panel : E Daniels (Presiding Member)
: Y Carrim (Tribunal Member)
: AW Wessels (Tribunal Member)
Heard on : 13 July 2020
Order Issued on : 13 July 2020
Reasons Issued on : 15 July 2020
REASONS FOR DECISION
Approval
[1] On 13 July 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved the proposed transaction in terms of which Investec Bank Ltd
(“Investec Bank”) is acquiring control over Omwieco (Pty) Ltd (“Omwieco”).
[2] The reasons for the approval of the proposed transaction follow.
Parties to the transaction
[3] The primary acquiring firm, Investec Bank is a wholly owned subsidiary of
Investec Ltd, which is listed on the JSE. Investec Ltd is not controlled by any
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single shareholder. Investec has interests in various industries, inter alia, in the
financial and property sectors. Of relevance to this proposed transaction are
the activities of Investec Property Group Holdings Proprietary Limited
("Investec Property Holdings"), which ultimately controls two subsidiaries,
namely, Extension 24 Commercial Leasing Company Proprietary Limited
("Extension 24") and Huddle Investments Proprietary Limited ("Huddle
Investments") that are involved in developing and selling residential property in
Gauteng.
[4] Investec Property Holdings and its subsidiaries will be collectively referred to
as the Investec Property Group.
[5] Investec Bank focuses on investment banking, treasury and specialised
finance, private client activities and asset management.
[6] The target firm is Omwieco, which is controlled in equal proportions by Investec
Bank and two other shareholders who will be referred to as “the sellers”.
Omwieco does not control any firm.
[7] Omwieco is a property development company engaged in the development of
freehold and sectional title unit residential properties in the Somerset Lakes
Lifestyle Estate in Somerset Lakes, Somerset West in the Western Cape.
Omwieco only has one property development being the Somerset Lakes
Lifestyle Estate. At the time of notification, Omwieco consisted of 33 built
residential units and 244 unbuilt residential stands.
Proposed transaction and rationale
[8] Investec Bank intends to acquire the remaining shareholding and associated
shareholder claims of Omwieco from the sellers. Post-merger Investec Bank
will have sole control of Omwieco.
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Relevant market and impact on competition
[9] The Competition Commission (“Commission”) identified a horizontal overlap
between the activities of the merging parties as they are both active in the
market for the development and sale of residential properties. The Commission,
however, found that there is no geographic overlap as Investec Property
Group’s residential property activities are in Gauteng. Given the distance
between the respective properties of the merging parties, it seems unlikely that
the one would act as a constraint on the other. The Commission is, therefore,
of the view that the proposed transaction is unlikely to alter the structure of any
of the affected markets.
[10] The Commission also found a vertical overlap, because Investec Bank currently
provides senior debt funding to Omwieco. The vertical link is also of concern to
a competitor of Omwieco. The concerned competitor submitted that Omwieco
may compete on funding terms and conditions that are not market related post-
merger. The Commission found that the vertical relationship between Investec
Bank and Omwieco already exists pre-merger and the concern is, therefore,
not merger specific.
[11] The Commission further found that Investec Bank is already a shareholder in
Omwieco and that the financing arrangement is not introduced by the proposed
transaction. Lastly, the Commission found that there are numerous financial
institutions directly competing against Investec Bank and that there are unlikely
to be foreclosure concerns arising from the proposed transaction.
[12] Due to the above, the Commission concluded that the merger is unlikely to
result in a substantial lessening of competition in the market for the
development and sale of residential property. We found no reason to disagree
with the Commission.
Public interest
[13] The proposed transaction raises no public interest concerns.
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Conclusion
[14] 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,
no public interest issues arise from the proposed transaction. Accordingly, we
approved the proposed transaction unconditionally.
15 July 2020
Mr Enver Daniels Date
Ms Yasmin Carrim and Mr Andreas Wessels concurring.
Tribunal Case Manager : Kgothatso Kgobe
For the Merging Parties : D Arteiro and S Rodze of Werksmans Inc.
For the Commission : B Chomela