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TLG MidCo (Pty) Ltd v The Logistics Group (Pty) Ltd (LM150Dec21) [2022] ZACT 3; [2022] 1 CPLR 15 (CT) (16 March 2022)

78 Reportability
Competition Law
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Brief Summary

Competition Law — Merger Approval — Conditional approval of merger between TLG MidCo (Pty) Ltd and The Logistics Group (Pty) Ltd — TLG MidCo to acquire 99.61% of TLG shares — No substantial prevention or lessening of competition found — Conditions imposed to enhance black economic empowerment ownership — Tribunal approves merger subject to implementation of HDP Transaction to increase ownership by historically disadvantaged persons.

Comprehensive Summary

Summary of Judgment


1. Introduction


These reasons concern a large merger determination by the Competition Tribunal of South Africa in case LM150Dec21. The proceedings arose from a proposed transaction in which TLG MidCo (Pty) Ltd was the primary acquiring firm and The Logistics Group (Pty) Ltd was the primary target firm.


The Tribunal conditionally approved the merger on 02 March 2022, and later furnished written reasons for decision dated 16 March 2022. The matter followed an investigation and recommendation process conducted by the Competition Commission. The Tribunal’s approval was made subject to a public-interest condition directed at enhancing the spread of ownership by historically disadvantaged persons (HDPs).


The general subject-matter of the dispute was whether the acquisition of control over a logistics group operating strategic terminal and logistics assets in Southern Africa would raise competition concerns (horizontal or vertical effects) and/or require public-interest conditions, particularly relating to ownership in terms of the Competition Act’s public-interest framework.


2. Material Facts


The transaction entailed TLG MidCo acquiring 99.61% of the issued shares in TLG, together with all rights attached to those shares, resulting in TLG MidCo exercising control over TLG upon implementation. TLG MidCo was described as a newly incorporated entity, controlled by TLG Acquisition Holdings (Pty) Ltd, also newly incorporated for the purposes of the transaction and not conducting business activities.


TLG Acquisition Holdings was to be controlled by three shareholder groupings: AIIF4 Seed Partnership (37%), acting through its general partner; Old Mutual Life Assurance Company (South Africa) Limited (OMLACSA) in respect of the pooled portfolio of IDEAS (37%); and the Mokobela-Shataki Consortium (South Africa) (26%), with its acquisition vehicle still in the process of being established. The Tribunal recorded that AIIF4 was a newly established fund and that the proposed transaction would be its first investment, while IDEAS was a domestic infrastructure equity fund product of OMLACSA.


The target firm, TLG, was a South African company controlled by Zeder Financial Services Limited, itself controlled by Zeder Investments Limited, with PSG Financial Services Limited being the largest shareholder in Zeder Investments. The TLG Group operated strategic logistical and terminal assets in Southern Africa, including port and rail terminal services, warehousing, stevedoring, and digital transport technology services.


On the competition assessment, the Commission found, and the Tribunal accepted, that there were no horizontal or vertical overlaps between the activities of the merging parties. In particular, it was recorded that the Old Mutual Group did not own interests in firms producing substitutable products or services relative to those supplied by TLG in South Africa, and that there were no supply relationships between the Old Mutual Group and the TLG Group in South Africa.


On public interest, the merging parties confirmed that the transaction would not negatively affect employment and would not result in retrenchments or redundancies. On ownership, the Tribunal recorded that TLG’s then-existing empowerment attributes were derived indirectly through a structure involving the FPT Group BEE Trust holding an interest in an entity that held a stake in TLG SA Holdings (Pty) Ltd, which was described as only one subsidiary within the TLG Group; the Tribunal noted that there was no empowerment partner as a direct shareholder of TLG.


The merging parties further conveyed that the Old Mutual Group intended to implement a new empowerment structure at the shareholder level, by procuring a BEE partner as an indirect shareholder with no less than an effective 25% equity interest (described in the reasons as an empowerment transaction and, in the conditions, as an HDP Transaction). The Commission accepted that this would increase HDP ownership and recommended approval subject to conditions giving effect to that transaction, which the Tribunal ultimately imposed.


3. Legal Issues


The central legal questions before the Tribunal were whether the proposed merger was likely to result in a substantial prevention or lessening of competition in any relevant market, and whether public-interest considerations warranted conditional approval.


The competition question primarily concerned the application of law to fact under the merger control provisions: whether the factual commercial position of the parties disclosed any competitive overlaps or relationships that could give rise to anti-competitive effects. The public-interest question similarly involved applying statutory public-interest considerations to the facts, including an evaluative judgment about whether a condition aimed at increasing ownership by HDPs should be imposed and, if so, in what form.


In the ownership dimension, the Tribunal had to consider the relevance of increased HDP ownership under section 12A(3)(e) of the Competition Act and whether the proposed commitment justified a condition that would ensure implementation within a defined timeframe and with monitoring obligations.


4. Court’s Reasoning


On competition, the Tribunal proceeded from the Commission’s findings that there were no horizontal overlaps and no vertical relationships between the acquiring side (including the Old Mutual Group) and the target group’s logistics operations. The Tribunal accepted the Commission’s specific assessment that the Old Mutual Group did not hold interests in firms offering products or services reasonably interchangeable with those offered by the TLG Group in South Africa, and that there were no relevant supply links between them. On that basis, the Tribunal agreed with the conclusion that the transaction was unlikely to result in a substantial prevention or lessening of competition in any relevant market.


On public interest, the Tribunal addressed employment and ownership. Regarding employment, the Tribunal relied on the merging parties’ confirmation that the transaction would not result in retrenchments or redundancies in South Africa, and it did not identify employment-related concerns requiring conditions.


The Tribunal’s principal public-interest focus was ownership. It recorded the merging parties’ explanation that TLG’s empowerment status was derived through an existing structure at subsidiary level and that there was no empowerment partner directly at the shareholder level of TLG. It further recorded the merging parties’ proposal (supported by the Commission) to implement an empowerment/HDP transaction at the acquiring structure level, aimed at ensuring that one or more HDPs would hold no less than 25% of TLG Acquisition Holdings.


The Tribunal accepted the Commission’s view that the proposed HDP transaction would increase levels of ownership by HDPs for purposes of section 12A(3)(e), and it treated this as a positive public-interest effect. The Tribunal then adopted a condition, agreed between the Commission and the merging parties, requiring implementation of the HDP transaction by the implementation date or within six months thereafter, while leaving the acquiring firm with discretion to determine the identities of the HDP shareholders and the allocation proportions among them. The Tribunal also endorsed monitoring and compliance mechanisms contained in the conditions, including notice of the implementation date and an affidavit confirming compliance after implementing the HDP transaction, with apparent breach procedures referencing the relevant Commission and Tribunal rules.


5. Outcome and Relief


The Tribunal conditionally approved the large merger between TLG MidCo (Pty) Ltd and The Logistics Group (Pty) Ltd.


The relief granted took the form of an ownership-related condition requiring the acquiring firm to implement an HDP Transaction involving the transfer of a shareholding of no less than 25% in TLG Acquisition Holdings (Pty) Ltd to one or more historically disadvantaged persons, by the implementation date or no later than six months thereafter. The conditions further required notification to the Commission of the implementation date within five days and submission of an affidavit confirming compliance within ten days after implementation of the HDP transaction, and provided for breach and variation procedures.


No separate costs order was recorded in the reasons provided.


Cases Cited


No cases were cited in the provided judgment text.


Legislation Cited


Competition Act 89 of 1998 (as amended), including section 12A(3)(e), section 3(2), section 19, and section 26.


Rules of Court Cited


Rules for the Conduct of Proceedings in the Competition Commission, including Rule 39.


Rules for the Conduct of Proceedings in the Competition Tribunal, including Rule 37.


Held


The Tribunal held that the proposed acquisition of control by TLG MidCo (Pty) Ltd over The Logistics Group (Pty) Ltd was unlikely to substantially prevent or lessen competition, because the Commission’s investigation revealed no horizontal overlap, no vertical overlap, and no relevant supply relationships between the merging parties’ activities.


The Tribunal further held that the merger raised a positive public-interest consideration concerning the spread of ownership by historically disadvantaged persons. It therefore approved the merger subject to a condition obliging the acquiring firm to implement an HDP Transaction transferring at least 25% of the shareholding in TLG Acquisition Holdings (Pty) Ltd to one or more HDPs within a defined timeframe and subject to reporting and compliance measures.


LEGAL PRINCIPLES


The Tribunal applied the merger assessment framework under the Competition Act by evaluating whether the transaction would likely lead to a substantial prevention or lessening of competition in any relevant market, including through horizontal overlaps, vertical relationships, and other structural links such as supply relationships that could affect competitive dynamics.


The Tribunal applied the public-interest framework, including section 12A(3)(e), by considering whether the merger would affect the promotion of a greater spread of ownership, in particular by historically disadvantaged persons as defined in section 3(2). Where the merger was competitively benign but presented an opportunity for a public-interest improvement, the Tribunal accepted and imposed a behavioural/structural ownership condition designed to secure that improvement, coupled with monitoring and compliance obligations and procedures for breach and potential variation on good cause shown.

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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no.: LM150Dec21
In the large merger between:
TLG MidCo (Pty) Ltd (Primary Acquiring Firm)
And
The Logistics Group (Pty) Ltd (Primary Target Firm)
REASONS FOR DECISION
[1] On 02 March 2022, the Competition Tribunal (“Tribunal”) conditionally approved a
large merger between TLG MidCo Proprietary Limited (“TLG MidCo”) and The
Logistics Group Proprietary Limited (“TLG”). The imposed conditions relate to a greater
spread of ownership.
[2] The proposed transaction involves TLG MidCo acquiring 99.61% of the issued shares
of TLG, together with all the rights attached to such shares, including but not limited
to, the right to receive all distributions declared, made or paid in respect of such shares.
Upon implementation of the transaction, TLG MidCo will exercise control over TLG.
Primary acquiring firm
[3] TLG MidCo is a newly incorporated entity. It is controlled by TLG Acquisition Holdings
Proprietary Limited (“TLG Acquisition Holdings”), also a newly incorporated company.
TLG Acquisition Holdings will be controlled by the following firms:
(i) AIIF4 Seed Partnership (“AIIF4”) (37%) acting through AIIF4 Seed General
Partner Proprietary Limited;
(ii) Old Mutual Life Assurance Company (South Africa) Limited (“OMLACSA”), in
respect of the pooled portfolio of assets of the Infrastructural, Developmental
and Environmental Assets Managed Fund (“IDEAS”) (37%); and

2
(iii) Mokobela-Shataki Consortium (South Africa) (26%).
[4] TLG MidCo and TLG Acquisition Holdings were established for the purposes of the
proposed transaction and thus do not undertake any business activities in South Africa
or elsewhere.
[5] AIIF4 is a newly established fund. The proposed transaction will be the first investment
for AIIF4. AIIF4’s primary investment objective is to generate attractive risk adjusted
returns through equity and equity-related investments in infrastructure and
infrastructure related assets in Africa, with a focus on sub-Saharan Africa.
[6] Founded in 1999, IDEAS is a linked investment policy-based, pooled portfolio product
of OMLACSA. The fund is a domestic infrastructure equity fund which invests in
economic infrastructure (roads and railways), social infrastructure (housing and public
private partnerships) and renewable energy infrastructure (solar and wind projects) in
the SADC region.
[7] OMLACSA operates as an insurance company providing life, health and disability
insurance services.
[8] Currently, the Mokobela-Shataki Consortium acquisition vehicle is still being
established.
Primary target firm
[9] The primary target firm is TLG, a company registered in accordance with the laws of
South Africa. TLG is controlled by Zeder Financial Services Limited (“Zeder”). Zeder is
controlled by the Zeder Investments Limited (“Zeder Investments”). The largest
shareholder in Zeder Investments is PSG Financial Services Limited (“PSG Financial
Services”), which currently holds approximately 48.6% of the issued share capital of
Zeder Investments. PSG Financial Services is a wholly-owned subsidiary of the JSE-
listed PSG Group Ltd.
[10] The TLG Group operates strategic logistical and terminal assets in Southern Africa
including port and rail terminal services, warehousing facilities, stevedoring facilities,
and digital transport technology services.

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Competition assessment
[11] The Competition Commission (“Commission”) found no horizontal or vertical overlaps
between the activities of the merging parties. Specifically, the Old Mutual Group does
not own any interest in any firms which produce any products or provide services in,
into or from South Africa which can be considered by buyers as reasonably
interchangeable with, or a substitutable for, any products or services provided by the
TLG Group in South Africa. Further, there are no supply relationships between the Old
Mutual Group and the TLG Group in South Africa.
[12] Given the above, the Commission concluded that the proposed transaction will not
lead to any substantial prevention or lessening of competition in any relevant market.
We concur with this finding.
Public interest
Employment
[13] The merging parties confirmed that the proposed transaction will not have a negative
effect on employment in South Africa and will not result in any retrenchments or
redundancies.1
Ownership
[14] The merging parties submitted that TLG derives its black economic empowerment
(“BEE”) status from a structure in terms of which the FPT Group BEE Trust owns a
51% stake in TLG Empowerment Holdings Proprietary Limited which, in turn, owns a
26% stake in TLG SA Holdings Proprietary Limited (“TLGSH”). There is therefore no
empowerment partner as a shareholder of TLG directly. TLGSH is only one of the
many subsidiaries within the TLG Group.
[15]They further submitted that the Old Mutual Group wishes to implement a new black
economic empowerment structure at the TLG shareholder level, by procuring a black
economic empowerment partner as an indirect shareholder of TLG, holding no less
than an effective 25% equity interest in TLG in the manner determined by TLG and its
empowerment partner (“Empowerment Transaction”). The merging parties also stated
that the Old Mutual Group has already identified the preferred BEE partners (acting as

that the Old Mutual Group has already identified the preferred BEE partners (acting as
1 See Form CC4(1) at page 12 of the Merger Record, as well as the merging parties’ Joint
Competitiveness Report, at pages 49 and 59 of the Merger Record.

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part of a consortium) and is at an advanced stage in finalising the terms. According to
the merging parties the implementation of the Empowerment Transaction will result in
a net positive effect on the spread of ownership for historically disadvantaged persons
(“HDPs”).
[16] The Commission agreed that the Empowerment Transaction will increase levels of
ownership by HDPs in firms in the market in terms of Section 12A(3)e of the
Competition Act and recommended that the proposed transaction be approved subject
to conditions relating to the Empowerment Transaction.
[17] The Tribunal approved the proposed transaction subject to the following condition as
agreed to between the Commission and the merging parties:
“The Acquiring Firm shall on the Implementation Date (or no later than 6 months after
the Implementation Date), implement the HDP Transaction 2. In this regard, the
Acquiring Firm will, in its sole discretion, determine the identities of the prospective
HDP shareholders that will participate in the HDP Transaction as well as the proportion
of shares that will be allotted to each such prospective HDP shareholder.”
[18] We concur that the HDP Transaction as provided for in the conditions has a positive
impact on the public interest as it increases the post-merger levels of ownership by
HDPs.
Conclusion
[19] We conclude that the proposed transaction is unlikely to result in a substantial
prevention or lessening of competition in any relevant market. The proposed
transaction has been approved subject to the ownership-related conditions attached
hereto as Annexure “A”.
16 March 2022
Mr Andreas Wessels Date
Prof. Liberty Mncube and Ms Yasmin Carrim concurring
2 “HDP Transaction” means the acquiring group’s commitment to transfer a shareholding of no less than
25% in TLG Acquisition Holdings to one or more HDPs; and “HDPs” mean historically disadvantaged
persons, as defined in section 3(2) of the Competition Act.

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Tribunal Case Managers: Kameel Pancham and Leila Raffee
For the Merging Parties: Derushka Chetty, Wade Graaff and Keabetswe
Magano of Edward Nathan Sonnenbergs Inc.
For the Commission: Portia Bele, Grashum Mutizwa and Tamara Paremoer

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ANNEXURE “A”
TLG MidCo Proprietary Limited
and
The Logistics Group Proprietary Limited
Case No: LM150Dec21
CONDITIONS
1. DEFINITIONS
The following expressions shall bear the meanings assigned to them below and cognate expressions
bear corresponding meanings -
1.“Acquiring Firm” means TLG MidCo Proprietary Limited;
2. "Approval Date" means the date referred to on the Competition Tribunal’s Merger
Clearance Certificate (Form CT 10);
3. "Commission" means the Competition Commission of South Africa, a statutory body
established in terms of section 19 of the Competition Act;
4.“Competition Act” means the Competition Act, No. 89 of 1998, as amended;
5."Commission Rules" mean the Rules for the Conduct of Proceedings in the
Competition Commission;
6."Conditions" mean these conditions;
7.“Days” mean any calendar day which is not a Saturday, a Sunday or an official public
holiday in South Africa;
8. “HDPs” mean historically disadvantaged persons, as defined in section 3(2) of the
Competition Act;
9. “HDP Transaction” means the acquiring group’s commitment to transfer a
shareholding of no less than 25% in TLG Acquisition Holdings Proprietary Limited to
one or more HDPs;

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10."Implementation Date" means the date, occurring after the Approval Date, on which
the Merger is implemented by the Merging Parties;
11."Merger" means the acquisition of control by the Acquiring Firm over the Target Firm;
12."Merging Parties" mean collectively the Acquiring Firm and the Target Firm;
13.“Target Firm” means The Logistics Group Proprietary Limited;
14.“TLG Acquisition Holdings Proprietary Limited” means the company that directly
controls the Acquiring Firm; and
15.“Tribunal” means the Competition Tribunal of South Africa, a statutory body
established in terms of section 26 of the Competition Act.
2. CONDITIONS TO THE APPROVAL OF THE MERGER
2.1. The Acquiring Firm shall on the Implementation Date (or no later than 6 months after
the Implementation Date), implement the HDP Transaction. In this regard, the
Acquiring Firm will, in its sole discretion, determine the identities of the prospective
HDP shareholders that will participate in the HDP Transaction as well as the proportion
of shares that will be allotted to each such prospective HDP shareholder.
3. MONITORING
3.1. The Acquiring Firm shall inform the Commission in writing of the Implementation Date,
within 5 (five) Days of its occurrence.
3.2. The Acquiring Firm shall, within 10 (ten) Days of the date of implementation of the HDP
Transaction, submit an affidavit to the Commission confirming compliance with the
Conditions.
4. APPARENT BREACH
4.1. An apparent breach by the Merging Parties of any of the Conditions shall be dealt with
in terms of Rule 39 of the Rules for the Conduct of Proceedings in the Commission
read together with Rule 37 of the Rules for the Conduct of Proceedings in the Tribunal.
5. VARIATION
5.1. The Merging Parties and/or the Commission may at any time, on good cause shown,
apply to the Tribunal for the Conditions to be waived, relaxed, modified and/or
substituted.

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6. GENERAL
6.1. All correspondence in relation to the Conditions must be submitted to the following e-
mail addresses: mergerconditions@compcom.co.za.

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