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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM165Dec22
In the large merger between:
Sanlam Ltd and Sanlam Life Insurance Ltd Primary Acquiring Firms
and
AfroCentric Investment Corporation Ltd
Primary Target Firm
Introduction
[1] On 19 April 2023, the Competition Tribunal (“Tribunal”) unconditionally approved the
proposed acquisition by Sanlam Ltd (“Sanlam”), Sanlam Life Insurance Ltd (“Sanlam
Life”) of AfroCentric Investment Corporation Ltd (“Afro Centric”). Following the
implementation of the proposed transaction, Sanlam will have sole control over the
AfroCentric Group.
Parties to the Proposed Transaction
[2] The primary acquiring firms are Sanlam and Sanlam Life (“Sanlam Group”). Sanlam is
a public company incorporated in accordance with the laws of the Republic of South
Panel : G Budlender (Presiding Member)
: T Vilakazi (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 19 April 2023
Reasons issued on : 17 May 2023
REASONS FOR DECISION (Non-Confidential)
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Africa. Sanlam is listed on the Johannesburg Stock Exchange (“JSE”) and is not
controlled by any single shareholder.1
[3] Of relevance to the proposed transaction is that Sanlam wholly owns Sanlam Life. In
turn, Sanlam Life controls ACT Healthcare Assets (Pty) Ltd (“AHA”) as to 28.7% with the
remaining shares in AHA being held by AfroCentric (the primary target firm). AHA, in
turn, directly holds all the operating assets of AfroCentric. In other words, Sanlam
indirectly controls all the operating assets of the primary target firm, AfroCentric.
[4] The primary target firm is AfroCentric, a public company incorporated in accordance with
the laws of the Republic of South Africa. AfroCentric is listed on the JSE and is not
controlled by any single shareholder.2 AfroCentric, the firms controlling it and the firms
controlled by it are hereafter collectively referred to as the “AfroCentric Group”.
[5] AfroCentric controls AHA as to 71.3% and , as mentioned above, the remaining 28.7%
shareholding is held by Sanlam.
Activities of the parties
[6] We note here that the Sanlam Group and AfroCentric Group provide a number of
services to each other.
[7] The Sanlam Group provides the following services to the AfroCentric Group:
7.1. potential sales leads for individual healthcare advice;
7.2. co-branding, white labelling, and marketing of AfroCentric’s healthcare products
(i.e., health insurance, corporate wellness and gap cover products branded as
“Sanlam Gap Cover” and “Sanlam Primary Care”, respectively); and
7.3. underwriting services for cell captive short-term insurance products.
[8] Further, the Sanlam Group provides, among other services, healthcare advisory or
consulting services to individuals.
1 As at 31 December 2021, the firms holding a beneficial shareholding greater than 5% of the issued share capital
in Sanlam were (i) Public Investment Corporation SOC Ltd (14.24%); and (ii) Ubuntu -Botho Investments (Pty) Ltd
(13.13%).
(13.13%).
2 As at 30 June 2022, the persons holding a beneficial shareholding greater than 5% of the issued share capital in
AfroCentric were: (i) Community Healthcare Holdings (Pty) Ltd (22.41%); (ii) Golden Pond Trading 175 (Pty) Ltd
(16.01%); (iii) RQ Investments (Pty) Ltd (9.93%); (iv) ARC Financial Services Investments (Pty) Ltd (8.46%); (v)
XTR Investment Capital (5.1%); and (vi) WHB Holdings (5.1%).
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[9] The AfroCentric Group provides the following services to the Sanlam Group:
9.1. marketing services;
9.2. potential sales leads for non-life insurance products; and
9.3. corporate wellness services.
[10] Further, the AfroCentric Group provides, among other services, healthcare advisory or
consulting services to individuals.
Transaction and Rationale
[11] In terms of the proposed transaction, Sanlam intends to acquire between 51% and
74.65% in AfroCentric. The proposed transaction is intended to be implemented by way
of two related and interdependent acquisitions:
11.1. The “Partial Offer”: Sanlam will, to the extent that a sufficient portion of the
shareholders of AfroCentric accept Sanlam’s offer to acquire their shares,
acquire a minimum of 31.3% and a maximum of 64.45% of the then -current
issued shares in AfroCentric. The shareholders will have three options on which
they can accept Sanlam’s offer and these include (i) 100% cash for AfroCentric’s
shares; (ii) 50% cash and 50% of the value in AfroCentric shares to be
exchanged for shares in Sanlam; and (iii) 100% of AfroCentric’s shares to be
exchanged for shares in Sanlam; and
11.2. The “Asset-for-Share Transaction”: to the extent that the Partial Offer proceeds,
Sanlam Life and AfroCentric will conclude an asset for share agreement in terms
of section 42 of the Income Tax Act 58 of 1962 in terms of which AfroCentric
shall issue shares to Sanlam Life equal to 28.7% of the shares in AfroCentric,
subsequent to such issue in consideration for the disposal by Sanlam Life to
AfroCentric of all the shares held by Sanlam Life in AHA, being 28.7% of the
shares therein.
[12] Accordingly, following the implementation of the proposed transaction:
12.1. Sanlam will hold between 22.3% and 45.95% of the shares in AfroCentric by
virtue of the Partial Offer (with the percentage shareholding immediately
following the Partial Offer having been diluted by virtue of the issue of new shares
following the Partial Offer having been diluted by virtue of the issue of new shares
in accordance with the Asset-for-Share Agreement); and
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12.2. Sanlam Life will hold 28.7% of the shares in AfroCentric by virtue of the Asset -
for-Share Agreement.
[13] In sum, as Sanlam Life is a wholly owned subsidiary of Sanlam, Sanlam will then
effectively hold between 51% and 74.65% of the shares in AfroCentric as a result of the
proposed transaction and will enjoy sole control thereover in terms of the Competition
Act, 89 of 1998 (“the Act”). The remaining share capital, between 25.35% and 49% will
be held by various non-controlling shareholders.
[14] Considering that the transaction is taking place in two parts, namely the Partial Offer
prior to the Asset -for-Shares transaction, the Competition Commission (“the
Commission”) assessed whether or not the proposed transaction constitutes a single
indivisible transaction.
[15] In this regard the Commission noted that both Sanlam and Sanlam Life are subject to
common shareholding by virtue of Sanlam Life being a wholly owned subsidiary of
Sanlam, and that both acquisitions are interrelated in the sense that the Asset-for-Share
Transaction (i.e. Sanlam Life Acquisition) is conditional o n the implementation of the
Partial Offer Transaction (Sanlam Acquisition). Further, both Sanlam and Sanlam Life
operate interrelated businesses.
[16] Based on the above, the Commission concluded that the proposed transaction is
indivisible and has, accordingly, assessed it as a single transaction. We find no reason
to differ from the Commission’s assessment of the proposed transaction.
Rationale
[17] The primary acquiring firms submitted that t he proposed transaction, which
contemplates Sanlam deepening its investment in AfroCentric and becoming the sole
controller thereof, is the next step in this longstanding relationship, for the benefit and
growth of both businesses. Further, and through the proposed transaction, Sanlam will
be able to integrate AfroCentric’s product offering into its ecosystem, while AfroCentric
be able to integrate AfroCentric’s product offering into its ecosystem, while AfroCentric
will gain increased access to the wide Sanlam distribution network. AfroCentric’s client
base will also benefit from the strength of the Sanlam brand as well as access to the
overall Sanlam product offering.
[18] The primary target firm, Afro Centric, submitted that the proposed transaction will see
Sanlam become a strategic shareholder in AfroCentric and thereby have alignment with
other AfroCentric shareholders in the future strategy of AfroCentric. Sanlam’s move from
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shareholding/control at the level of AHA up to AfroCentric will facilitate improved
alignment of interest between the Sanlam Group and AfroCentric, potentially supporting
further investment from the Sanlam Group, development of bespoke healthcare
solutions through the co-operation of the Sanlam Group and AfroCentric teams and
potential integration of the Sanlam Group and AfroCentric products.
[19] The Commission was satisfied with the submitted rationale for the proposed transaction
and concluded that the main rationale for this instant transaction is to enable the
alignment of AfroCentric’s growth strategy with that of Sanlam.
The Commission’s competition assessment
[20] The Commission found that the proposed transaction presents both a horizontal and
vertical overlap in the activities of the merging parties.
[21] In terms of the horizontal overlap, the merging parties both supply healthcare advisory
or consulting services to individuals.
[22] In terms of the vertical overlap, the Commission notes that the vertical overlap is bi -
directional in the sense that both parties to the merger provide certain services and
products to each other.
[23] Sanlam provides AfroCentric with the following products and/ or services:
23.1. potential sales leads for individual healthcare advice;
23.2. co-branding, white labelling, and marketing of AfroCentric’s healthcare products
(i.e. health insurance as well as corporate wellness and gap cover products
branded as ‘Sanlam Gap Cover’ a ‘Sanlam Primary Care’, respectively); and
23.3. underwriting services for cell captive short-term insurance products.
[24] However, the Commission noted that Sanlam is not in the primary business of providing
potential sales leads, nor in the business of co-branding, white labelling and marketing
healthcare services, products or advice. In this regard, the merging parties submit that
Sanlam only provides these products and/or services to AfroCentric, as a result of
Sanlam only provides these products and/or services to AfroCentric, as a result of
Sanlam’s shareholding in AfroCentric, and provides these services at no cost. As such,
the Commission concluded that, absent Sanlam’s shareholding in AfroCentric, it is
unlikely that Sanlam would provide these potential sales leads to AfroCentric and/or any
other healthcare advisory business. Considering the above, the Commission found it
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appropriate to not assess the effect of the proposed transaction on the market segments
for (i) the upstream provision of potential sales leads for individual healthcare advice and
(ii) the upstream co-branding, white labelling and marketing services.
[25] Conversely, AfroCentric provides Sanlam with the following products and/ or services:
25.1. marketing services;
25.2. potential sales leads for non-life insurance products; and
25.3. corporate wellness services.
[26] The Commission noted that AfroCentric only provides potential sales leads to Sanlam
as a result of Sanlam’s shareholding in AfroCentric. As such, the Commission concluded
that, absent Sanlam’s shareholding in AfroCentric it i s unlikely that AfroCentric would
provide potential sales leads to Sanlam. Considering the above, the Commission found
it similarly appropriate to not assess the proposed transaction on its effect in the market
segment for the upstream provision of sales leads for non-life insurance products.
[27] Further, and in terms of the marketing services provided by AfroCentric to Sanlam, the
Commission noted that these services were provided as a result of a once -off contract
between Sanlam and AfroCentric to launch Sa nlam Health Solutions. In other words,
Sanlam used AfroCentric’s marketing services for a single non -recurring initiative and
AfroCentric does not currently receive revenue from Sanlam pertaining to the provision
of marketing services. The merging parties submitted that Sanlam generally uses the
marketing services of various agencies, and this will remain the case post -merger.
Considering the above, the Commission was of the view that the proposed transaction
is unlikely to result in any foreclosure concern s and did not assess the effect of the
proposed transaction on the market segment for the supply of marketing services . In
addition, the Commission note d that Sanlam only sources its occupational health and
addition, the Commission note d that Sanlam only sources its occupational health and
wellness services from AfroCentric. Therefore, the transaction does not raise foreclosure
concerns in this regard.
[28] Thus, the Commission assessed the effect of the proposed transaction in the following
markets:
28.1. the provision of healthcare advisory or consulting services to individuals;
28.2. the upstream provision of underwriting services for cell captive short -term
insurance products;
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28.3. the downstream provision of medical aid gap cover insurance; and
28.4. the upstream provision of corporate wellness services.
Horizontal effects
The national market for the provision of healthcare consulting services to individuals
[29] In this market, the Commission found that the merged entity will have a combined market
share of approximately (post-merger) in the national market for the provision of
healthcare consulting or advisory services to individuals. Further, the Commission found
that there are various alternative suppliers of healthcare consulting or advisory services
in South Africa in addition to the merged entity.3
[30] Given the small combined market share and the fact that the merged entity will face
competition from multiple other entities, the Commission concluded that the proposed
transaction is unlikely to result in the merged entity attaining market power in the national
market for the provision of healthcare consulting or advisory services to individuals. We
are in accord with the Commission’s findings in this market.
Vertical effects
The national upstream market for the provision of underwriting services for cell captive
short-term insurance products
[31] In this market the Commission found that t he Acquiring Group has an approximately
market share in the relevant national market for the provision of underwriting
services for cell captive short -term insurance products ba sed on revenue. In addition,
the Commission noted that there are seven registered cell captive short-term insurers in
South Africa in 2022.4
[32] Based on the above, the Commission concluded that the Acquiring Group does not have
the ability to foreclose its downstream competitors from accessing underwriting services
for cell captive short-term insurance products. There are several viable alternatives
3 Including: (i) HealthMan; (ii) Sasfin; (iii) SHM Consulting; (iv) Glopin Healthcare Consultants; (v) CMAC Healthcare
Consulting; and (vi) GTC Healthcare Consulting.
4 Including: (i) Centriq Insurance Company; (ii) FirstRand Insurance Services Company Ltd; (iii) Guardrisk
Insurance Company Ltd; (iv) Hollard Specialist Insurance Ltd; (v) Mutual & Federal Risk Financing Ltd; (vi) Yard
Insurance Ltd; and (vii) Escap SOC Ltd.
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upstream who will continue to constrain the merged entity. We are in accord with the
Commission’s findings in this market.
The downstream market for the national provision of medical aid gap cover
[33] Centriq, a subsidiary of Sanlam, underwrites AfroCentric’s medical aid gap cover
product ( i.e., Sanlam Gap Cover – this product is co -branded with Sanlam). The
Commission noted that it was unable to obtain information on revenue or the client base
of market participants operating in the downstream national market for the provision of
medical aid gap cover. However, the Commission found that this relevant market has
several active players.5
[34] Considering the above, the Commission note d that AfroCentric is unlikely to be a
dominant player in the downstream national market for the provision of medical aid gap
cover. This is largely because AfroCentric competes with at least 20 players in this
relevant market and is thus unlikely to account for a substantial proportion of purchases
from the upstream market. We have no reason to differ from the Commission’ s
assessment of the market save to say that the Commission should endeavour to provide
the Tribunal with information on revenue or the client base, and base its assessment on
same wherever possible, even if this means relying on previous matters (that are not
outdated) where the same markets were considered in those respective assessments.
The upstream national market for the provision of occupational health and wel lness
services
[35] The Commission noted, again, that it was unable to obtain information on revenue or
client base of market participants operating in the upstream market for the provision of
occupational health and wellness services. However, the Commission provided that this
relevant market has several active players.6
5 Including: (i) Afr oCentric (Sanlam Gap Cover); (ii) Absa; (iii) Stratum Benefits; (iv)Turnberry; (v) Essential Gap
Cover; (vi) Ambeldown; (vii) Complimed; (viii) Xelus; (ix) Sirago; (x) Jenius; (xi) Talksure; (xii) Old Mutual; (xiii)
Momentum GapCover; (xiv) Discovery Gap C over; (xv) Liberty Gap Cover; (xvi) Constantia Insurance; (xvii)
Alexander Forbes; (xviii) Auto & General Insurance; (xix) Liberty Essential Gap Cover; (xx) Admed Gap Cover; and
(xxi) Zestlife Gap Cover.
6 Including: (i) Assegai Strategic Investments ASI; (ii) Careways Wellness (Pty) Ltd; (iii) HSP Group SA(Pty) Ltd;
(iv) MIMED Occupational Health (Pty) Ltd; (v) SetsMol Enterprise; (vi) Company Wellness Solutions; (vii) M&M
Wellness Solutions (Pty) Ltd; (viii) Maeko Social Work Services; (xi) MMM3 Training and Development; (x) NBC
Holdings (Pty) Ltd; (xi) Personnel Transit 2 Wellness; (xii) Universal Corporate Wellness (Pty) Ltd; (xiii) Velocity
Wellness; (xiv) Calibre Clinical Consultants (Pty) Ltd; (xv) Centre for Occupational and Wellness Services; (xvi)
Kaelo Risk (Pty) Ltd; (xvii) ICAS Southern Africa; (xviii) LifeAssist (Pty) Ltd; (xix) Life Employee Health Solutions
(Pty) Ltd; (xx) Metropolitan Health Corporate (Pty) Ltd; (xxi) Workforce Healthcare (Pty) Ltd; and (xxii) High Heelers
(Pty) Ltd.
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[36] The Commission concluded that the market appears to be fragmented and as such,
AfroCentric is unlikely to be a dominant player in the upstream national market for the
provision of occupational health and wellness services.
[37] Considering the above, the Commission was of the view that the proposed transaction
is unlikely to raise any substantial input foreclosure concerns for firms operating in the
downstream market segment for the provision of insurance products (where Sanlam i s
active). We agree with the Commission’s assessment pertaining to input foreclosure in
this market, but reiterate the caveat as detailed in paragraph 34, above.
[38] Finally, the Commission concluded that customer foreclosure concerns do not arise as
Sanlam only sources its occupational health and wellness services from AfroCentric. In
other words, none of the upstream providers of occupational health and wellness
services are going to lose Sanlam as a customer.
[39] Considering the findings of the Commission as detailed above, we are of the view that
the proposed transaction is unlikely to result in the substantial lessening of competition
in any of the affected markets.
Public Interest
Employment
[40] The merging parties provided an unequivocal statement that the proposed transaction
will have no negative effect on employment in South Africa and no retrenchments or
redundancies, as a result of the proposed transaction are contemplated.
Promotion of a greater spread of ownership
[41] The pre-merger HDP shareholding in the Acquiring Group and Target Group is 46.85%
and 50.43%, respectively.
[42] The most recent submission from the merging parties on the final structure of the
transaction, indicates the following:
42.1. and
42.2.
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[43] Thus, f ollowing the implementation of the proposed transaction, AfroCentric’s HDP
shareholding will increase from 50.43% pre-merger to between % post-
merger.
[44] The proposed transaction does not raise any other public interest concerns.
Conclusion
[45] We conclude that , the proposed transaction does not raise any competition or
employment concerns. Further the proposed transaction has a positive effect on the
greater spread of ownership as in section 12A(3)(e) of the Act.
[46] We therefore approve the transaction unconditionally.
17 May 2023
Adv. G Budlender SC Date
Dr Thando Vilakazi and Prof. Fiona Tregenna concurring
Tribunal Case Manager:
Kameel Pancham
For the Merging Parties: Lizel Blignaut and Lameez Mayet of ENSafrica
For the Commission:
Zukile Sokapase and Grashum Mutizwa