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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM025May21
In the matter between:
Dis-Chem Pharmacies Limited Primary Acquiring Firm
And
Kaelo Holdings Proprietary Limited Primary Target Firm
AW Wessels (Presiding Member)
E Daniels (Tribunal Member)
Panel:
T Vilakazi (Tribunal Member)
Heard on: 08 October 2021
Order Issued on: 08 October 2021
Reasons Issued on: 19 October 2021
REASONS FOR DECISION
[1] On 08 October 2021, the Competition Tribunal (“Tribunal”) conditionally approved the
transaction involving Dis-Chem Pharmacies Limited (“Dis-Chem”) and Kaelo Holdings
Proprietary Limited (“Kaelo”).
[2] Dis-Chem is a company listed on the Johannesburg Stock Exchange and is ultimately
controlled by the trustees for the time being of the Saltzman Family Trust. Dis-Chem
has a national chain of 181 pharmacy stores located in the major metropolitan areas
and suburbs in South Africa. Through its various subsidiaries, Dis-Chem is active along
the pharmaceutical supply chain and provides inter alia scheduled and unscheduled
pharmaceutical products and healthcare services.
[3] Kaelo is controlled by Spionkop Proprietary Limited (“Spionkop”). 1 Its key product
offering includes gap cover insurance (for medical scheme members); primary
healthcare insurance (for uninsured South Africans); occupational health clinics and on-
site primary care clinics (for large organisations); and psychological wellbeing services
(for all South Africans).
Transaction and condition
[4] The proposed transaction involves Dis-Chem acquiring 25% of the issued share capital
of Kaelo. Through its 25% shareholding, Dis-Chem will acquire minority rights to
approve or veto matters of strategic importance in Kaelo. Therefore, upon the
1 Spionkop holds 54.34% of the shares in Kaelo as at 31 January 2021.
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implementation of the proposed transaction, Dis-Chem will exercise control over Kaelo
as envisaged by section 12(2)(g) of the Competition Act 89 of 1998, as amended (“the
Act”).
[5] The proposed transaction is approved subject to the condition that should Dis-Chem
acquire sole unfettered control in Kaelo after the approval date, it shall notify the
acquisition of the sole unfettered control in Kaelo as a merger in terms of section 13A
of the Act.
Competition assessment
[6] The Competition Commission (“Commission”) considered the activities of the merging
parties and found that the proposed transaction does not result in any horizontal
overlaps.
[7] The Commission identified a vertical overlap in the activities of the merging parties in
that Kaelo provides healthcare, occupational health and wellness services to Dis-Chem
for the benefit of Dis-Chem’s employees. We note that Dis-Chem procures these
services from Kaelo only and not from any of Kaelo’s competitors.
[8] The Commission assessed the proposed transaction from a vertical perspective in the
following markets:
6.1. the national (upstream) market for the provision of managed healthcare services;
6.2. the national (upstream) market for the provision of occupational health and
wellness services; and
6.3. the national (downstream) market for procuring managed healthcare services
and occupational health and wellness services.
[9] The Commission found that the merger is unlikely to result in any input or customer
foreclosure concerns given (i) the relatively low market shares of Kaelo in the vertically
affected markets; and (ii) Dis-Chem does not procure any managed healthcare
services, and occupational healthcare and wellness services from any other service
provider in the market and as such the proposed transaction is unlikely to raise any
customer foreclosure concerns.
[10] Customers and competitors raised no concerns regarding the effects of the proposed
transaction on competition.
transaction on competition.
[11] We have no reason to disagree with the Commission’s conclusion that the proposed
transaction is unlikely to substantially prevent or lessen competition in any relevant
market.
Public interest
[12] Regarding potential employment effects, the merger parties submitted that there shall
be no retrenchments as a result of the proposed transaction.
[13] The proposed transaction raises no other public interest concerns.
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Conclusion
[14] We approve the proposed transaction subject to conditions relating to the notification
by Dis-Chem of potential future sole unfettered control in Kaelo. The conditions are
attached hereto.
19 October 2021
Mr. A. W. Wessels Date
Mr. E Daniels and Dr. T Vilakazi concurring
Tribunal Case Manager: D Mogapi
For the Merging Parties: M Sambo and L Mabidikane
For the Commission: R Maphwanya