COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM118Sep22
In the matter between:
SPE Mid-Market Fund I Partnership (represented by
the general partner, SPE Mid -Market Fund I
General Partner Proprietary Limited)
Primary Acquiring Firm
and
K2022654763 (South Africa) Pty) Ltd Primary Target Firm
[1] On 02 November 2022, the Tribunal unconditionally approved the large merger
whereby SPE Mid-Market Fund I Partnership (“SPE Fund”) represented by the
general partner, SPE Mid-Market Fund I General Partner Pty Ltd (“SPE Fund
General Partner”) intends to acquire of the entire issued share capital of
K2022654763 (South Africa) (Pty) Ltd (‘’New HoldCo’’) . Post-merger, the SPE
Fund will hold of New HoldCo’s issued shares and acquire sole control
over New HoldCo.
The parties
[2] The primary acquiring firm is the SPE Fund controlled by its general
partner, SPE Fund General Partner, which is controlled by
Panel : S Goga (Presiding Member)
: M Mazwai (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 02 November 2022
Order issued on : 02 November 2022
Reasons issued on : 15 November 2022
REASONS FOR DECISION
Sanlam Limited. The SPE Fund wholly controls the
following companies, namely (i) Cavalier Group of Companies (Pty) Ltd
(“Cavalier Group of Companies”), (ii) Absolute Pets (Pty) Ltd (“Absolute
Pets”)and (iii) Q Link (Pty) Ltd (“Q Link”). The primary acquiring firm is a
financial services group in South Africa, with business interests elsewhere in
Africa, the United Kingdom, Europe, India, Australia, Southeast Asia, and the
United States of America.1 Sanlam and its subsidiaries are collectively referred
to as the “Acquiring Group”.
[3] The Target firm is K2022654763 (South Africa) (Pty) Ltd (“New HoldCo”). New
HoldCo is a newly established investment holding company which controls
100% of Skipwaste Proprietary Limited (“ New OpCo ”) (“the Target
Businesses”)2. New HoldCo is jointly controlled by the Susan McDonald Share
Trust (“SMST”) (as to of its issued share capital) and the McDonald
Family Trust (“MFT”) (as to of its issued share capital). The Trusts are
no controlled by any firm or person. The Trustees of both SMST and MFT
comprise of the same three individuals . The Target Business es collectively
known as Skip waste provide integrated general and hazardous waste and
environmental management solutions to commercial, industrial, and retail
clients in Gauteng.3
The transaction
[4] The proposed transaction involves the SPE Fund, represented by the general
partner, the SPE Fund General Partner, acquiring of New HoldCo's issued
share capital.4 As mentioned above, New HoldCo controls New OpCo, which
in turn controls the Target Businesses.
Competition Assessment
[5] The Commission assessed the merging parties' activities and it found that there
is no horizontal overlap between their activities since none of the Acquiring
1 The Acquiring Group, through its business clusters, the Sanlam Life and Savings; Sanlam
Emerging Markets Cluster; Short -Term Insurance Cluster; Sanlam Investments Cluster ; and
Emerging Markets Cluster; Short -Term Insurance Cluster; Sanlam Investments Cluster ; and
Sanlam Private Equity, provides financial solutions to individual and instituti onal clients across
a multitude of market segments.
2 The target businesses comprising of Consolidated Waste Proprietary Limited (t/a SkipWaste),
Future Energy Waste Solutions Proprietary Limited and African Energy Innovations Proprietary
Limited.
3 Merger Recommendations, p 8 of 19, para [8].
4 The parties to the proposed transaction include, the SPE Fund, New HoldCo and the Trustees
for the time being of SMST and the MacDonald Family Trust. See Merger Record, p58 of 518,
para [3.1].
Group's products and/or services are substitutes for those provided by New
HoldCo.
[6] The Commission did note that there is a vertical overlap between the merging
parties, since SkipWaste provided Sanlam Life Insurance, a member of the
Acquiring Group, with garbage collection and transport services for a total of
for the fiscal year that concluded on February 28, 2022.5 However,
after it assessed the above, it found that the proposed transaction is unlikely to
result in significant foreclosure concerns in any relevant market.
[7] According to the Commission's assess ment, the proposed transaction is
unlikely to give rise to any foreclosure concerns in any relevant market given
the de minimus value of the services and the absence of any vertical integration
as a result of the transaction (i.e., these services have no c onnection to
Sanlam's client-facing operations at all).
[8] No third-party concerns were raised regarding the transaction.
[9] On the evidence before it, the Tribunal agreed with the Commission’s
assessment and findings. Having considered the above, the Tribunal is of the
view that the proposed transaction is unlikely to result in substantial prevention
or lessening of competition in any relevant market.
Public Interest
Effect on employment
[10] The Commission considered whether the proposed transaction would have an
adverse effect on employment. According to the merging parties, there will be
no reductions or job losses as a result of the proposed transaction. The merging
parties assert that the SPE Fund is a private equity fund with no employees in
South Africa or elsewhere.
[11] The Commission engage d with the employee representative at Sanlam
and SPE Fund General Partner, and he
stated that the employees had not raised any concerns regarding their
employment in relation to the proposed transaction. Furthermore, the employee
representatives at SkipWaste,
also confirmed to the Commission that the employ ees had not
also confirmed to the Commission that the employ ees had not
raised any concerns about their employment in relation to the proposed
transaction.
[12] The Commission concluded that proposed transaction is unlikely to raise
employment concerns.
5 Merger Recommendations, p21 of 24, para [29].
Effect on the spread of ownership
[13] The Commission further assessed the impact on a greater spread of ownership.
According to the merging parties, since New HoldCo and New OpCo are new
firms with no trading history, they do not yet have any B-BBEE shareholding or
credentials. However, both the SPE Fund and its general partner, the SPE Fund
General Partner, are 100% black owned funds, according to the B -BBEE
Ownership Codes. Furthermore, the Acquiring Group is publicly listed on the
Johannesburg Securities Exchange (“ JSE”), and its shareholder s include
HDPs.6 The merging parties assert that the Sanlam is 49% black owned.7
[14] According to the merging parties, Skipwaste has no HDP shareholders. The
SPE Fund is 100% black owned under the B -BBEE Ownership Codes
applicable to private equity funds. As a result, the proposed transaction will
increase the HDP shareholding in SkipWaste from 0% to approximately
and promote a greater spread of ownership in the market (however defined) by
HDPs.8 The Commission accepted the merging parties’ submissions and
concluded that the proposed transaction is unlikely to have a negative effect on
the greater spread of ownership.
[15] The Tribunal requested information on how the Commission and the merging
parties assessed the spread of ownership, as well as whether the distribution
of ownership across various people or groups was considered in addition to the
overall HDP shareholding.
[16] The Commission noted that they considered the aggregate increase in HDP
shareholding, since following the proposed merger, the B -BBEE ownership in
the New HoldCo will increase in terms of the aggregate percentage owned by
HDPs. In response to questions from the Tribunal the merging parties noted
that in their B-BBEE certificates provided to the Commission, information on the
spread of ownership across categories such as Black Women, Black New
Entrants and Black Designated Groups (including Black Youth, Black Disabled,
Entrants and Black Designated Groups (including Black Youth, Black Disabled,
Black Unemployed, Black People Living in Rural Areas and Black Military
Veterans). They note that their certificate shows that the proposed transaction
will have a substantial positive impact on the ownership held by Black Women
(an increase in ownership of ), Black Youth (an increase in ownership
of ) and Black Unemployed (an increase in ownership of ).
[17] Therefore, as the Target business currently does not have any HDP ownership,
the Tribunal believe s the transaction will not have an adverse impact on the
spread of ownership.
Conclusion on public interest
6 Merger Recommendations, p21 of 24, para [29].
7 Merger Recommendations, p21 of 24, para [30].
8 Merger Record, p69 of 518, para [10.5].
[18] In light of the above, the Tribunal concludes that the proposed transaction is
unlikely to have an adverse effect on public interest.
Conclusion
[19] After carefully examining the available evidence, the Tribunal concluded that it
is unlikely that the proposed transaction will significantly lessen or prevent
competition in any relevant market. Furthermore, there are no public interest
concerns raised by the transaction.
15 November 2022
Presiding Member
Date
Concurring: Ms Mondo Mazwai and Professor Fiona Tregenna
Tribunal Case Managers: Sinethemba Mbeki
For the Merging Parties: Richardt van Rensburg and Tayla Theron for
ENSafrica
For the Competition: Inga Macingwane and Thabelo Masithulela