COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM190MAR22
In the matter between:
Sanlam Investment Holdings (Pty) Ltd (And its
Subsidiaries)
Primary Acquiring Firms
and
The Asset Management Business of Absa Group
Limited
Primary Target Firm
[1] On 21 July 2022, the Tribunal conditionally approved the large merger in which
Sanlam Investment Holdings (Pty) Ltd (“SIH”) (and its subsidiaries ) intends to
acquire The Asset Management Business of Absa Group (“Absa Group”). In
exchange, Absa Financial Services Limited (“AFS”), as subsidiary of Absa
Group will acquire a minority shareholding in SIH. Post -merger, The Asset
Management Business of Absa Group will be controlled by SIH.1
[2] SIH and its subsidiaries are incorporated in terms of the laws of South Africa
and are controlled by SIH Capital Holdings (Pty) Ltd (“Sanlam Capital
Holdings”). Sanlam Capital Holdings is ultimately controlled by Sanlam Limited
(“Sanlam”). Sanlam is a public company listed on the Johannesburg Stock
1 Merger Recommendation, p4 of 39, para [1].
Panel : I Valodia (Presiding Member)
: A Ndoni (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 21 July 2022
Order issued on : 21 July 2022
Reasons issued on : 25 July 2022
REASONS FOR DECISION
Exchange, A2X and the Namibian stock exchanges. Sanlam operates through
several subsidiaries, associated companies, and joint ventures. Relevant to the
proposed transaction are the activities of SIH, wh ich provides asset
management services throughout South Africa. Sanlam and all its subsidiaries
will collectively be referred to as the Sanlam Group or the Acquiring Group”.
[3] The Asset Management Business of Absa Group comprises traditional
products and a sset classes such as money market, equity, bonds, absolute
return and balance fund type of products, conducted thro ugh Absa Asset
Management, Absa Alternative Asset Management, The AMM Business, Absa
Fund Managers, the EFT Business.2
Competition Assessment
Market definition: relevant product market
[4] According to the merging parties, the relevant market for the proposed
transaction is the broad or general market for asset management services. The
merging parties relied on South African3 and international4 case precedents.
[5] In assessing the relevant product market for the proposed transaction, t he
Commission relied on the Tribunal’s decision between Capitalworks Atlanta GP
Proprietary Limited and Peregrine Holdings Limited (“Capitalworks”) 5, where it
accepted the market definition of a broad market for asset management
services. Therefore, it assessed the broad market for asset management
services.
[6] When considering the proposed transaction, t he Tribunal did not find any
evidence suggesting that the relevant product market was different from the
from the market definition used in the Capitalworks decision.
Relevant geographic market
[7] In determining the relevant geographic market, the Commission considered the
European Commission’s (“EC”) findings in the NN Group N.V and Delta Lloyd
N.V (“NN Group NV”) and GE Capital and Heller (“GE Capital”). In NN Group
2 The Target Firms are all ultimately wholly owned and controlled by Absa Financial Services
2 The Target Firms are all ultimately wholly owned and controlled by Absa Financial Services
Limited (“AFS”) except for the ETF Business which is wholly owned and controlled by Absa
Bank Limited (“Absa Bank”). AFS and Absa Bank are controlled by Absa Group.
3 Metropolitan Holdings Limited And Momentum Group , Case No.: LM021May20, the Tribunal
assessed the transaction as based in a national (broadly defined) market for the provision of
general asset management services to all investors as well as in national ly (more narrowed
defined) potentially relevant markets for the management of respectively (i) collective
investment schemes and (ii) general asset management funds.
4 The European Commission defined a broad market for asset management while leaving open
the possibility for segmenting between retail and institutional clients such as pension funds,
banks, and insurance companies.
5 Case No.: LM021May20.
NV, the EC considered the geographic scope for asset management was
national. However, in GE Capital, the EC considered that the market for private
equity investment could be national or wider but did not conclude as the matter
did not raise competition concerns.
[8] The Commission concluded that it would assess the effects of the proposed
transaction in the nati onal market for the provision of asset management
services as the merging parties’ activities occur throughout South Africa.6
[9] Based on the evidence provided above, the Tribunal also assessed the impact
of the proposed transaction in the national market for the provision of asset
management.
Market shares
[10] According to the Commission, the merged entity will have a market share of
approximately be 11.23%, with an accretion in the rele vant market of 5.32%.
The Commission found that there are several other competitors active in the
market and has raised no concerns with the proposed transaction.7
[11] No third parties raised concerns regarding the effects of the proposed
transaction on competition.
[12] Having considered the above, the Tribunal concluded that it is unlikely that the
proposed merger will result in any competition concerns.
Cross-shareholdings and information sharing
[13] The Commission assessed the possible concerns that may arise from cross -
shareholding and possible information exchang e, given that some of the
competitors of the merging parties own shares in the merging parties .8 The
Commission requested the parties to provides the following:
a. Information on whether or Ninety -One and Old Mutual can appoint
directors in the board of Absa Group.
b. Whether the Public Investment Corporation (“PIC”) 9 can veto any
decisions in Sanlam and Absa Group and the type of information the PIC
has access to as a shareholder in Sanlam and Absa Group.
6 Merger Recommendations, p26 of 39, para [87].
7 Merger Record, p28 of 39, para [89] and p28 of 39, para [92].
7 Merger Record, p28 of 39, para [89] and p28 of 39, para [92].
8 The Commission found that Ninety -One and Old Mutual, the competitors of SIH and Absa
Group in the market for provision of asset management services, are also shareholders in Absa
Group. Ninety-One has 5.65% shares, while Old Mutual has 5.27% shares in Absa Group.
9 PIC has interest in Sanlam (13.65%) , Absa Group (5.27%) , and other asset managers
including Stanlib, Ninety-One, Coronation and Nedgroup amongst others.
c. To explain how Sanlam and Absa Group will ensure that no
commercially sensitive information is shared between PIC and asset
management firms that PIC’s holds interest in.
[14] After considering the merging parties' responses to the above -mentioned
questions, the Commission concluded that the proposed transaction is unlikely
to result in coordinated effects in the form of sharing commercially sensitive
information because there is no cross-directorship between the merging parties
and the merging parties' competitors. This is because PIC, Old Mutual and
Ninety-One do not have a right to appoint director s in the merged entity, as
result of their minority shareholding.
[15] Access to any commercially sensitive information of the merging parties is
precluded because both the merging parties are publicly listed companies and
need to comply with the JSE’s listing requirements which regulate disclosure
obligations. Furthermore, the merging parties submitted that where an asset
managers hold shares in a listed entity, any decision as to how to exercise
voting rights in respect of these shareholdings will be made by the individual
asset manager because they owe fiduciary duties to their clients (in respect of
the non-discretionary investment mandates).
[16] Considering the above the Commission is of the view that the proposed merger
is unlikely to result in coordinated effects in the form of sharing of commercially
sensitive information as there are no cross directorships between the parties.
Public Interest
Effect on employment
[17] The Commission considered whether the proposed transaction would have an
adverse effect on employment. The merging parties submitted that the
proposed transaction may give rise to potential duplication of roles at senior
investment professional, senior professional, senior executive, and senior
management levels retrenchments. The merging parties also indicated that SIH
management levels retrenchments. The merging parties also indicated that SIH
has not performed a detailed assessment of the potentially duplicative roles and
no person has been identified as being potentially duplicated.10
[18] The employee’s representative of SIH employees, Mr Sipho Gumbi, was
contacted by the Commission during its investigation to ascertain whether the
employees of SIH were notified and if they had any concerns with the proposed
transaction, however, the Commission did not receive a response. 11 For the
target firm, the employees are represented by the South African Society of Bank
Officials (“SASBO”), which was also contacted by the Commission.
10 Merger Recommendation, p33 of 39, para [113].
11 Merger Recommendation, p34 of 39, para [115].
a. SASBO submitted that they note the impact of the proposed transaction
on employment and rely on the undertaking made by the merger parties,
that the 26 affected staff members will be redeployed as they are highly
skilled, experienced and in demand within the industry. SASBO raised
no objection to the proposed transaction.
[19] The Tribunal observed the effect of the proposed transaction on employment
and raised a concern that no detailed assessment of the potentially duplicative
roles was completed by the merger parties. The Tribunal requested the parties
to elucidate (i) whether there were any staff bel ow the senior professional,
senior executive and senior management level that may be affected by the
proposed transaction and (ii) it requested the merging parties and the
Commission to consider an undertaking not to retrench any staff below the
senior pro fessional, senior executive, and senior management levels for a
period of 2 (two) year post implementation of the merger.
[20] The Tribunal is of the view that a condition to guarantee that they are no
retrenchment below the Patterson Grade D level would address an important
public interest concern. 12 In response to the Tribunal ’s request, the merging
parties and the Commission agreed to the condition.
Effect on the spread of ownership
[21] The merging parties submitted that the proposed transaction would have the
positive effect of increasing the assets under management of black-owned fund
managers.13 This is because as a result of the merger , the target group would
form part of Sanlam Group which is recognised as black owned in terms of the
Financial Sector Charter. The Acquiring Group is a level 1 B-BBEE contributor,
and it has a historically disadvantaged persons (“HDP”) shareholding of 49%.
Absa Group has 12.83% HDP s hareholding, the proposed will result in Absa
Group acquiring initial shareholding in SIH.14
[22] Having considered the above, the Tribunal concludes that the proposed
[22] Having considered the above, the Tribunal concludes that the proposed
transaction does not raise any public interest concerns.
Conclusion
[23] For the reasons set out above, the Tribunal finds that the proposed transaction
is unlikely to substantially prevent or lessen competition in any relevant market.
Furthermore, the transaction raises no public interest concerns.
12 See Annexure A: Merger Conditions, p4 of 6, para [1.21]. “Patterson Grade D” means middle
management who are professionally qualified. This includes the senior professional, senior
executive, and senior management levels.
13 Merger Recommendations, p36 of 39, para [126].
14 Merger Recommendation, p36 of 39, para [126].
25 July 2022
Professor Imraan Valodia
Date
Ms Andiswa Ndoni and Professor Fiona Tregenna concurring
Tribunal Case Managers: Makati Seekane and Sinethemba Mbeki
For the Merging Parties: Anton Roets, Avias Ngwenya of Nortons Inc and
Natalia Lopes, Aziza Mdee of ENS Africa.
For the Competition: Zintle Siyo and Themba Mahlangu