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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM146Oct20
In the matter between
SPE Mid-Market Fund I Partnership (represented by
the general partner, SPE Mid-Market Fund I General
Partner (Pty) Ltd)
Primary Acquiring Firm
And
Cavalier Group of Companies (Pty) Ltd Primary Target Firm
Panel : Y Carrim (Presiding Member)
: T Vilakazi (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 25 November 2020
Order Issued on : 25 November 2020
Reasons Issued on : 10 December 2020
REASONS FOR DECISION
Approval
[1] On 25 November 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved the proposed transaction in terms of which SPE Mid-Market Fund I
Partnership (“SPE Fund”), represented by the general partner, SPE Mid-Market
Fund I General Partner (Pty) Ltd is acquiring control over the Cavalier Group of
Companies (Pty) Ltd (“Cavalier Group”).
[2] The reasons for the approval of the proposed transaction follow.
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Parties to the transaction
[3] The acquiring firm is SPE Fund, a newly created fund that does not have any
business activities or operations. SPE Fund is ultimately controlled by Sanlam
Life Insurance Ltd acting through its Sanlam Private Equity division. Sanlam
Life Insurance is in turn wholly owned and controlled by Sanlam Ltd (“Sanlam”).
Sanlam is a public company that is listed on the JSE, with a secondary listing
on the Namibian Stock Exchange (NSX). Sanlam is not controlled by any one
shareholder/firm.
[4] Shareholders with an equity interest of more than 5% in Sanlam are Ubuntu-
Botho (Pty) Ltd and the Public Investment Corporation (PIC), on behalf of the
GEPF. Sanlam and its subsidiaries are collectively referred to as the “Sanlam
Group”.
[5] Sanlam Group controls various firms across multiple jurisdictions. Sanlam
Group has developed over time into a diversified financial services provider that
operates through five business clusters viz. (i) Sanlam Personal Finance
Cluster; (ii) Sanlam Emerging Markets Cluster; (iii) Short-term Insurance
Cluster; (iv) The Sanlam Corporate Cluster; and (v) the Sanlam Investment
Cluster. The Sanlam Group provides financial solutions to individual and
institutional clients across a multitude of market segments.
[6] The target firm is the Cavalier Group, a private company controlled by a half
dozen shareholders viz. Griekwaland Wes; Land and Agricultural Development
Bank of SA; Cavalier Group Trust; JDH Le Riche Family Trust; AB Steenkamp
Trust; and R&L Mulder Besigheidstrust. The Cavalier Group wholly owns and
controls the following subsidiaries: Cavalier Livestock (Pty) Ltd, Cavalier
Feeders (Pty) Ltd, Cavalier Abattoir (Pty) Ltd, and Cavalier Foods (Pty) Ltd.
[7] The Cavalier Group is a vertically integrated meat producer in SA, trading in the
procurement, packaging, sale and distribution of red meat and related products.
It has a lamb feedlot that can house up to 35000 head of sheep, a lamb abattoir
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and a 10 000m2 processing, de-boning and packaging plant. It also has a beef
abattoir alongside the lamb feedlot and abattoir.
Proposed transaction and rationale
[8] SPE Fund, represented by the SPE Fund General Partner, intends to acquire
a majority of the entire issued share capital of the Cavalier Group. Post-merger,
the Cavalier Group will be jointly controlled by SPE Fund and the management
shareholders of the Cavalier Group.
Impact on competition
[9] The Competition Commission (“Commission”) considered the activities of the
merger parties and found that the proposed transaction does not result in any
product overlaps. This is because the Sanlam Group provides financial
services to individual and institutional clients across multiple segments,
whereas Cavalier Group procures and wholesales livestock and as such,
competes with other national meat producers and wholesalers.
[10] The Commission further found that while the Sanlam private equity division
holds shares in various firms, none of these firms compete with the Cavalier
Group. Moreover, the Commission found that the proposed transaction does
not present a vertical overlap because the merger parties do not supply each
other with any products or services. The Commission however found that the
Cavalier Group procures short-term insurance products from Santam Ltd
(within the Sanlam Group), but this did not raise any competition concerns.
[11] Given the above, the Commission concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in any market.
[12] Upon consideration of the proposed transaction, we found that the PIC (a
shareholder of Sanlam) has interests in the feedlots and meat industry through
Karan Beef and Berlin Beef, competitors of the Cavalier Group. Given the PIC’s
interest in the Sanlam Group, we requested further information from the merger
parties and the Commission in order to ascertain whether the proposed
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transaction could give rise to any information exchange or co-ordination
concerns between the feedlot and red meat producers through common
shareholding of the PIC.
[13] The parties submitted that the PIC is merely an institutional investor, with a non-
controlling interest in Sanlam and does not have access to any commercially
sensitive information pertaining to Sanlam. 1 It will have no involvement in the
operations of the Cavalier Group post-merger. In light of this, we agree with
the Commission that the proposed transaction will not present any competition
concerns.
Public interest
[14] The Department of Trade, Industry and Competition (DTIC) raised concerns
that the proposed transaction might be inconsistent with the promotion of a
greater spread of ownership public interest element contemplated in section
12A(3)(e). To guard against this, the DTIC proposed that the merger parties
commit to set up a worker share ownership scheme/trust to benefit the existing
workers of the target firm who are not directors of the company, at the time of
the merger approval, or commit to do so within a reasonable timeframe not
exceeding two years thereafter.
[15] The Commission assessed whether the proposed transaction will be
inconsistent with the promotion of a greater spread of ownership. Pre-merger,
the Cavalier Group does not have any shareholders who are members of the
Historically Disadvantaged Persons (HDPs), nor a worker ownership scheme.
The Commission found that the proposed transaction will promote
transformation because the Cavalier Group will be jointly controlled by a black-
owned fund manager. Thus, for purposes of section 12A(3)(e) of the
Competition Act, the proposed transaction will substantially increase the levels
of ownership by HDPs from less than 10% to over 60%. The Commission also
notes that the Cavalier Group operates in a sector of the South African
1 Email from ENS dated 23 November 2020; Email from the Commission dated 25 November 2020.
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economy that is characterised by low levels of transformation. The Commission
concluded that the proposed transaction will promote transformation of the
Cavalier Group.
Conclusion
[16] In view 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.
10 December 2020
Ms Yasmin Carrim Date
Dr. Thando Vilakazi and Prof. Fiona Tregenna concurring.
Tribunal Case Manager : Kgothatso Kgobe
For the Merging Parties : R van Rensburg and T Theron of ENS
For the Commission : R Mabunda and T Masithulela