1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM175Dec20
K2020791073 (South Africa) Proprietary Limited (“New Holdco”) (Primary Acquiring
Firm)
And
Adcorp Support Services Proprietary Limited (Primary Target Firm)
Heard on: 24 February 2021
Order Issued on:
24 February 2021
REASONS FOR DECISION
[1] On 24 February 2021, the Competition Tribunal unconditionally approved the large
merger between K2020791073 (South Africa) Proprietary Limited (“New Holdco”) and
Adcorp Support Services Proprietary Limited (“Adcorp”) in terms of which, New Holdco
will acquire 100% of the entire issued share capital of Adcorp from Adcorp Workforce
Solutions Proprietary Limited. Post-merger, New Holdco will have sole control of
Adcorp.
[2] The acquiring firm, New Holdco is controlled by a consortium of two firms, namely ASS
Investco Proprietary Limited (“Investco”) and Corvest 12 Proprietary Limited (“Corvest
12”); as well as members of Adcorp management through their three management
vehicles. Investco is controlled by Agile Capital Four Proprietary Limited (“Agile Capital
Four”) and Corvest 12. Agile Capital Four controls several firms, none of which are
relevant to this transaction and Investco does not control any firm. Corvest 12 is
controlled by RMB Corvest 2 Proprietary Limited (“RMB Corvest 2”) and RMB Corvest
2 is ultimately controlled by First Rand Limited (“FirstRand Group”). New Holdco was
incorporated for the purposes of this transaction and does not have any activities.
[3] Of relevance to this transaction are the following activities of the FirstRand Group: FNB
Advisory which is a provider of financial products through financial planners and wealth
managers; FirstRand STI , which is the legal assistance policy underwritten by
FirstRand Short-term Insurance; and FNB Employee Benefits, which provides group
funeral cover, group life cover, lump sum/capital disability covers, and group critical
illness cover.
illness cover.
[4] The target firm, Adcorp, is solely controlled by Adcorp Workforce Solutions Proprietary
Limited, which in turn is ultimately controlled by Adcorp Holdings Limited (“Adcorp
Holdings”). Adcorp Holdings is not controlled by any firm. Adcorp operates through
2
two business divisions: the funeral management services (“FMS”) division - which is a
niche outsourced service provider to the long -term insurance industry; and the
employee benefits (“EB”) division. Adcorp offers repatriation services, funeral support
services, and brokerage services to long-term insurance companies, such as those in
the FirstRand Group.
[5] The Competition Commission (“Commission”) identified a vertical overlap in the
activities of the parties and assessed the transaction in (i) the national upstream market
for the provision of long-term insurance related services and brokerage services,1 and
(ii) the national downstream market for long-term insurance related services. 2
[6] The Commission f ound that the proposed transaction is unlikely to result in
anticompetitive input foreclosure, foreclosing other insurers from accessing the long -
term insurance and brokerage related services of Adcorp, because the First Rand
Group does not use the long-term insurance related services provided by Adcorp, nor
any br okerage services , as it sells its long -term insurance products directly to
individuals. The Commission also found that Adcorp has a low market share in the
market for the provision of long -term insurance and brokerage services. In addition,
the Commission contacted the customers of Adcorp and none of these firms raised
any concerns regarding the proposed merger.
[7] The Commission found that the proposed transaction is unlikely to result in any
customer foreclosure by for example denying rivals of Adcorp access to the First Rand
Group as a customer to provide long -term insurance related services and brokerage
services to, as the First Rand Group has a low market share in the market for the
provision of long -term insura nce and therefore does not have market power. The
Commission also contacted the rivals of Adcorp and none of them raised any concerns
regarding the proposed merger.
regarding the proposed merger.
[8] The Commission considered whether, because of the merger, First Rand Group could
have access to the commercially sensitive information of rivals that use the services of
Adcorp.3 The Commission found that the proposed transaction is unlikely to result in
vertical coordination because the board structure of New Holdco will be comprised as
follows: there will be two appointees from Corvest 12, one appointee from Agile Capital
Four, and the three management shareholders. Furthermore, the two board members
of Corvest 12 are not board members of any firms that are related to the First Rand
Group’s long -term insurance business or any other long -term insurance business.
Additionally, the merging parties have given an undertaking that no individual, at any
point, will be appointed as a board member of New Holdco and, at the same time, at
any firm within the First Rand Group’s long-term insurance business.
[9] The Commission received a concern from a competitor to the FirstRand Group in the
long-term insurance and related services market.4 This competitor was concerned that
its commercially sensitive information would be accessible to the FirstRand Group, its
direct competitor. A subsequent submission from the competitor revealed that its fears
1 The Commission found that Adcorp contracts with insurance companies (and/or corporates) to provide services
that form part of their long-term insurance products.
2 This is because the First Rand Group, which is part of New Holdco, provides long -term insurance products
throughout South Africa, and some of the insurance policies provided by First Rand Group (or other insurers) have
added benefits that are procured from firms such as Adcorp.
3 This sharing of information could be facilitated through board members that sit on both the boards of New Holdco
and any of the First Rand Group’s long-term insurance businesses.
4 Record page 989-992.
3
were allayed by th e fact that the proposed transaction is effectively a management
buy-out, where Adcorp will not be wholly owned by Corvest 12 and New Holdco will
exercise sole, unfettered control over Adcorp.
[10] The Commission contacted the employee representatives of the m erging parties and
they confirmed that the employees had been notified of the proposed merger and had
not raised any concerns. The merger will result in greater spread of ownership in that
there was no B-BBEE ownership in Adcorp pre -merger and ( by applica tion of the
Modified Flow Through principle) Adcorp will become more than 51% black owned.
[11] We concluded that the proposed transaction does not substantially prevent or lessen
competition in any relevant market. The merger is also unlikely to have a negative
effect on employment.
24 March 2021
Ms Yasmin Carrim Date
Prof Imraan I. Valodia and Prof Fiona Tregenna concurring
Tribunal Case Manager: Mpumelelo Tshabalala
For the Merging Parties: Richardt van Rensburg and Tayla Theron of
ENSAfrica attorneys
For the Commission: Grashum Mutizwa and Beverley Chomela