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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM106Sep22
In the large merger between:
Manta Bidco Limited Primary Acquiring Firms
and
Mediclinic International Plc
Primary Target Firm
Introduction
[1] On 23 March 2023, conditionally approved the
proposed acquisition by Manta Bidco Limited Bidco of the entire issued share capital
are set out below.
Parties to the Proposed Transaction
[2] The primary acquiring firm is Bidco, a company duly incorporated under the laws of
England and Wales. Bidco is a 50/50 joint venture which is jointly controlled by Remgro
Panel : J Wilson (Presiding Member)
: I Valodia (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 15 March 2023
Last Submission Received : 22 March 2023
Reasons issued on : 19 June 2023
REASONS FOR DECISION
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Healthcare r.l.
[3] RHH is a company duly incorporated under the laws of South Africa. RHH is ultimately
wholly n the
is not directly or indirectly controlled
by any single firm or individual. Remgro, together with all the companies directly and
indirectly controlled by it, is referred to below as
[4] SAS is a company duly incorporated under the laws of the Grand Duchy of Luxembourg.
SAS is an indirect subsidiary of MSC Mediterranean S
a company duly incorporated under the laws of Switzerland. MSC is in turn wholly owned
by , a company
also duly incorporated under the laws of Switzerland. In South Africa, MSC Holding
indirectly controls various companies. MSC Holding, together with all the companies
directly and indirectly controlled by it, is referred to below as MSC
[5] The Remgro Group and the MSC Group are collectively referred to as the
[6] The primary target firm, Mediclinic, is a company duly incorporated under the laws of the
United Kingdom . Mediclinic has a primary listing on the London Stock Exchange
and a secondary listing on the JSE and the Namibian Stock Exchange.
shares are widely held, and no single firm or individual directly or indirectly controls it.
Mediclinic controls several firms, comprised mostly of hospitals, in various areas
including Jersey, the UK, the Netherlands, Luxembourg and Southern Africa. Relevant
to the proposed transaction is that Mediclinic wholly owns Mediclinic Southern Africa
(Pty) MSA controls and operates various hospitals, mental health
facilities and day-care clinics across South Africa and Namibia.
Activities of the parties
[7] Bidco is a newly incorporated joint venture entity for purposes of the proposed
transaction.
[8] Remgro is a diversified investment holding company which holds investments in the
healthcare, customer products, financial services, infrastructure, industrial and media
industries.
[9] MSC is a global provider of maritime transport and containerised liner shipping services.
[9] MSC is a global provider of maritime transport and containerised liner shipping services.
In South Africa, MSC provides container liner shipping services, general cargo/break-
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bulk transport services, as well as Roll-on Roll-off shipping services, logistics services
and inland transportation services.
[10] Mediclinic is a diversified international private healthcare services group, with divisions
in Switzerland, Southern Africa and
division includes 50 hospitals, five sub-acute hospitals, two mental health facilities and
14 day-care clinics across South Africa and Namibia.
Transaction and Rationale
[11] In terms of a Scheme of Arrangement under Part 26 of the UK Companies Act, Bidco
will acquire the entire issued ordinary share capital of Mediclinic, other than the
Mediclinic shares already owned by certain Remgro subsidiaries, namely RHH, Remgro
Health Ltd and Remgro Jersey (Pty) Ltd (representing approximately 44.56% of
[12] The shares held by the above Remgro subsidiaries will be acquired pursuant to a
Subscription and Rollover Agreement in terms of which:
12.1. The relevant Remgro subsidiaries have agreed to sell their 44.56% shareholding in
Mediclinic to Bidco in exchange for shares in Bidco; and
12.2. RHH and SAS have agreed to fund Bidco by way of equity to enable Bidco to satisfy
the cash consideration payable to the holders of the issued ordinary share capital
of Mediclinic prior to the implementation of the proposed transaction.
[13] Post-merger, Mediclinic will be ultimately indirectly jointly controlled by Remgro and
MSC through Bidco. Mediclinic will be delisted from the London, Johannesburg and
Namibian Stock Exchanges.
[14] The merging parties submitted the following regarding the s rationale for the
proposed merger:
wishes to support Mediclin -term growth ambition to further develop
existing operations and expand into new geographies. Remgro believes
ture towards a long-term, sustainable
construct, alongside a closely aligned partner, is important in realising
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. . .
Remgro and MSC are strongly aligned in their common desire to invest for the
long term in South Africa and the private healthcare sector. The Consortium
members also share a deep appreciation for the importance of access to high-
quality healthcare and the corresponding positive societal impact.
The Consortium believes that significant, long-term investment is required to
facilities, and to drive continued growth for the benefit of all stakeholders across
the continuum of care. Furthermore, the Consortium believes that private
ownership will better enable the management team to focus on and execute
their strategic vision for the business, supported by a closely aligned
shareholder group, away from the requirements of the public markets,
particularly in light of operating, regulatory and macro-economic uncertainty.
Private ownership will better support Mediclinic by providing greater flexibility
to capitalise on growth opportunities in existing and new markets in a more
agile manner.
Remgro recognises the significant benefits of a partner with a shared long-term
investment horizon, with the resources available to support the ongoing
investment in the business. MSC, as a container shipping company and private
cruise operator, brings extensive experience in operating a global business.
expertise as it seeks to continue to grow and expand its geographical footprint.
Remgro and MSC, therefore, believe that private ownership, under the
host governments and wider
Southern African, Swiss and Middle Eastern stakeholders
[15] The merg
The proposed transaction represents a near-term value realisation for
Mediclin
Consortium ownership will allow Mediclinic to grow and continue to serve its
customers through a broad range of high-quality healthcare services. The
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global connectivity that a partnership with MSC provides, an
other stated intentions for the business, management, employees, pension
schemes and other stakeholders of Mediclinic are also important factors that
have guided the proposed transaction. Quality healthcare is critical for a
owth and development. In South Africa, private healthcare
providers play an important role in this regard. With shareholders like SAS and
Remgro, that can continue to invest in South Africa, Mediclinic can continue
and grow the positive impact it makes for the benefit of all South Africans.
ompetition assessment
Incentives analysis
[16] found that there is no horizontal overlap
between the activities of the merging parties as MSC is not active in the provision of
private healthcare services. Therefore, the proposed transaction does not result in any
market share accretion. Rather, the proposed transaction involves an existing
shareholder (Remgro) increasing its effective shareholding in Mediclinic from 44.56% to
50% through Bidco, and MSC (a shipping company) also acquiring a 50% effective
interest in Mediclinic through Bidco.
[17] The Commission considered whether the proposed merger is likely to result in a change
in the strategic and operational direction of Mediclinic.
[18] In this regard, the Commission found that, pre-
Mediclinic entitles it to appoint 3 members to the board of directors of Mediclinic, which
is the holding company of MSA. However, the appointment of the third director is subject
to the requirement that the board has a majority of independent directors. Remgro has
in fact appointed only one member to the board of Mediclinic, which is currently
comprised of 12 directors (8 of which are independent directors). The Commission
of Mediclinic.
[19] As regards the post-merger position, the merging parties submitted that, for as long as
Remgro and SAS hold equal percentage shareholdings (currently 50% each) in Bidco,
Remgro and SAS hold equal percentage shareholdings (currently 50% each) in Bidco,
they may each nominate 3 directors for appointment to the board of directors of Bidco
(with no independent directors).
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[20] Having regard to the rights enjoyed by Remgro and SAS in Bidco, the Commission found
that they will both acquire joint control of Mediclinic through Bidco.
[21] The Commission also noted
a philosophy of decentralised management, which means that its subsidiaries have
autonomous boards of directors and management structures. The merging parties
submitted further that the acquisition of control of the Mediclinic group will not adversely
affect its management and operations, as the Consortium attaches great value to the
skills, experience and commitment of the existing management and employees of
Mediclinic, and will rely on them to deliver its vision to grow the business in both existing
and new locations.
[22] Having regard to the above, the Commission found that the proposed merger is unlikely
to result in any change in incentives in respect of the operations and strategic direction
of MSA.
Third party competition concerns
[23] During its investigation, the Commission received submissions from a group of
academics from the University of the Witwatersrand and the University of Cape Town
regarding the proposed merger (the Academics1. These concerns related
to in South Africa, including its
interest in Mediclinic as well as its alleged interests in Discovery Holdings Ltd
Holdings (Pty , which in turn has an interest in the Afrocentric group of
companies. All of the latter companies are involved on the funder side of the South
African private healthcare sector.
[24] The
they contend that, in the context of both the funder and provider
segments of the South African healthcare industry, the proposed merger raises both
horizontal and vertical concerns that are ultimately likely to result in higher costs being
incurred in relation to the provision of private healthcare services in South Africa.
[25] The merging part ns
were based, and also argued that they were not merger-specific.
were based, and also argued that they were not merger-specific.
1 Prof. (adj) Alex van den Heever, Prof. Jonathan Klaaren, Prof. Sharon Fonn and Dr Max Price.
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[26] The Commission investigated und that,
pursuant to an unbundling exercise conducted in 2022, they are now significantly lower
(7.9% in the case of Discovery and 8.2% in the case of MMH) than alleged by the
Concerned Academics, with no entitlement to appoint board members in either case.
[27]
not have any interest in CIH or the Afrocentric group of companies, but only in
subsidiary Community Investment Ven not
have any interests in the South African healthcare sector.
[28] Remgro also disclosed that it has an indirect interest of 18.5% in the National Healthcare
through its venture capital business, Invenfin. NHG provides medical
scheme administration and managed care services in the private healthcare sector.
However, the merging parties submitted that, whilst this shareholding entitles Invenfin
to appoint one of 7 directors on the board of NHG, Invenfin does not enjoy any form of
control of NHG, and this was confirmed by the Commission.
Information exchange
[29] The Commission also investigated
and NHG might afford it access to competitively sensitive information which could be
used by Mediclinic against its rivals.
[30] The merging parties submitted that Discovery and MMH are listed companies and are
also regulated by the Financial Services Conduct Authority ("FSCA"), the Prudential
Authority, and the Council for Medical Schemes ("CMS"), and must comply with the
Protection of Personal Information Act, 4 of 2013 ("POPIA"). As such, the merging
parties submitted that Remgro, as a minority shareholder in Discovery and MMH, only
has access to publicly available information of Discovery and MMH.
[31] As regards NHG, the merging parties submitted that NHG is an accredited healthcare
administrator and managed care organisation which is also regulated by the FSCA and
the CMS, and must comply with the POPIA. They stated further that, as an indirect
passive minority shareholder in NHG, Remgro does not have access to any confidential
passive minority shareholder in NHG, Remgro does not have access to any confidential
information of the medical aid schemes that NHG administers or the confidential
information of these schemes' members or their dependents. Furthermore, Invenfin's
representative on NHG's board is not involved with Mediclinic in any capacity.
[32] The merging parties argued, in conclusion, that Remgro
and NHG are minority interests which do not vest it with any control of any of these
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entities, or with access to any competitively-sensitive information that could benefit
Mediclinic against its rival healthcare providers.
[33] Based on its investigation, the Commission found interests in Discovery,
MMH and NHG do not vest it with any ability or incentive to influence the strategies and
operations of any of these firms. The Commission found that the risk of information
exchange could not be ruled out, but that there did not currently appear to be
mechanisms through which confidential information could be exchanged.
[34] The Commission also contacted various other providers of healthcare services, and
none of them raised any concerns regarding the proposed merger.
[35] The Commission accordingly concluded that the proposed transaction is unlikely to lead
to a substantial prevention or lessening of competition in the provision of private
healthcare services.
Public Interest
Employment
[36] The merging parties submitted that the proposed merger will not have a negative effect
on employment because it will not result in any retrenchments in South Africa.
[37] As noted above, the merging parties also submitted that the acquisition of control of the
Mediclinic group will not adversely affect the management and operations of Mediclinic,
and that the Consortium will rely on the current management and employees of
Mediclinic to deliver its vision to grow the business.
[38] The Commission contacted the employee representatives of the merging parties, and
they did not raise any concerns regarding the proposed merger.
[39] In addition, the merging parties made a commitment that (i) the merged entity would not
retrench any permanent or fixed term contract employees as a result of the proposed
transaction for a period of three years from the implementation date of the transaction;
and (ii) the aggregate number of Mediclinic employees will be maintained over a five
year period from the implementation date.
Promotion of a greater spread of ownership
year period from the implementation date.
Promotion of a greater spread of ownership
[40]
disadvant
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held by HDPs. However, the merging parties noted that one of the HDP shareholders,
Mpilo 1 NewCo (RF), which held 1% of the shares in Mediclinic, had subsequently
disposed of its shares on the open market.
[41] Based on this information, the Commission found that merger will result in a slight
increase in the HDP shareholding in Mediclinic from 14.33% to 15.82%.
Further public interest commitments
[42] However, the Department of Trade engaged further
with the merging parties to determine the willingness of the merger parties to make
additional public interest commitments. Pursuant to engagements with the DTIC and
additional commitments:
42.1. Collaboration with the Public Health Sector
42.1.1. Mediclinic will provide support on addressing surgical backlogs in the South
African public healthcare sector by performing, with partnering practitioners
and specialists, at least 1,000 pro bono surgeries at its facilities in South
Africa in aggregate over its next 5 financial years commencing on 1 April
2023 (subject to appropriate practitioners and specialists being available to
perform the surgeries in line with healthcare practice).
42.2. Doctor Engagement Programme
42.2.1. In furtherance of the above undertaking, and in consultation with the NDoH,
Mediclinic will implement a programme within its network of hospitals, aimed
at engaging doctors and encouraging them to assist with pro bono surgeries.
42.3. Skills Development And Corporate Social Responsibility Initiatives
Funding Allocations for Medical Training
42.3.1. Mediclinic shall, for its next 3 financial years commencing on 1 April 2023:
42.3.1.1. spend at least R22.5 million on medical training at Wits Donald Gordon
Medical Centre Pty Ltd (in which Mediclinic has a 49.9% shareholding) in
aggregate over the period;
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42.3.1.2. sponsor training grants and bursaries for medical training, of not less than
R30 million in aggregate over the period, taking into account, inter alia,
information on individuals in need, to be provided to Mediclinic by the
NDoH from time to time; and
42.3.1.3. make donations of not less than R15 million in aggregate over the period
to the NDoH Public Health Enhancement Fund or to a similar South
African medical training focused institution.
Nurses Training
42.3.2. Mediclinic shall, for its next 5 financial years commencing on 1 April 2023,
cover the full annual tuition costs of such number of nursing students that
will comprise, in aggregate, no fewer than 1,700 nursing students (counted
according to the number of nurses enrolled over the period), at an
approximate cost of R80 000 000.
42.4. Enterprise and Supplier Development
42.4.1. In collaboration with the NDoH, Mediclinic shall, during its next 5 financial
years commencing on 1 April 2023, spend at least an aggregate total
amount of R40 million in the form of grants or loans to support Unjani Clinics2
(or similar facilities in underserved communities) in the establishment or
upgrading of at least 20 clinics and/or mobile health units aimed at
advancing the South African healthcare sector, particularly in underserviced
areas.
42.5. Procurement
42.5.1. Mediclinic shall in aggregate for its next 5 financial years commencing on
1 April 2023, spend not less than R5 billion on procurement from Black-
owned businesses, of which amount Mediclinic shall spend no less than
R2.5 billion on procurement from Black-owned exempted micro-enterprises
and/or qualifying small enterprises.3 These spend commitments are made
on the basis that the goods and services that Mediclinic requires to be
procured are available on reasonable, practical and competitive terms that
2 Unjani is a network of black women-owned and operated healthcare clinics that provide accessible,
affordable, quality healthcare to low-income communities.
affordable, quality healthcare to low-income communities.
3 As defined in the relevant codes of good practice published in terms of the Broad-Based Black
Economic Empowerment Act, 53 of 2003, in terms of which Mediclinic's broad-based black economic
empowerment score is measured.
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comply with regulatory requirements (as applicable) and Mediclinics
reasonable requirements, particularly regarding availability, quantity, quality
aligned with market standards, counterparty risk and pricing.
42.6. Capital Expenditure
42.6.1. Mediclinic shall, for its next 5 financial years commencing on 1 April 2023,
incur no less than R5 billion of capital expenditure in its South African
operations.
42.7. Establishment of an Employee Benefit Scheme
42.7.1. Within 18 months after the implementation date of the proposed transaction,
MSA will establish, for the benefit of qualifying workers4, an employee benefit
scheme in accordance with specified key design principles.
42.7.2. In terms of the EBS, qualifying workers will be entitled to receive a share of
the profit after tax produced by or within the MSA, on a no-cost basis,
equivalent to the economic benefits that would be due to them in terms of a
notional vendor-financed employee share plan holding 5% of the shares in
MSA measured on a fully diluted basis.
[43] As regards the EBS, the DTIC had initially requested the merging parties to establish a
traditional employee share ownership plESOP for the benefit of Mediclinic
employees. However, the merging parties had submitted that this was not warranted
because, inter alia, the proposed merger does not negatively impact on HDPs.
[44] In its recommendation, the Commission noted the follo
proposal:
44.1. The proposed merger does not significantly alter the market structure, as it merely
involves an increase in the effective shareholding of Remgro in Mediclinic from
44.56% to 50%.
44.2. On calculation, the merger will not have an HDP-dilutive effect,
and will in fact result in a small increase in the HDP ownership of Mediclinic.
4 Defined as all employees as defined in the Labour Relations Act, 66 of 1995, in the continuous employ
of MSA and its subsidiaries and Medical Innovations (Pty) Ltd with more than one year tenure
of MSA and its subsidiaries and Medical Innovations (Pty) Ltd with more than one year tenure
regardless of grade / position, excluding all management employees sharing in a short-term incentive
plan.
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44.3. The merging parties had agreed to other several public interest commitments which
are significant and result in public interest benefits.
[45] Having regard to the above, the Commission concluded that, in the light of the conditions
that had been tendered by the merging parties, the proposed merger did not raise any
public interest concerns under section 12A(3)(e) or any of the other provisions of section
12A(3) of the Act.
[46] S
also agreed to the EBS referred to above. It appears that this represented a compromise
n the ESOP proposed by the DTIC. However,
the DTIC emphasised at the hearing that its willingness to accept the proposed EBS in
this case did not represent a change in its general position to advocate for traditional
ESOPs in respect of merger transactions.
The Tribunal hearing
[47] Having regard to the importance of the private healthcare sector in South Africa, the
information-sharing risks raised by the Commission, and the horizontal and vertical
concerns raised by the Concerned Academics, the Tribunal convened a pre-hearing on
22 February 2023. The pre-hearing was attended by representatives of the Commission
and the merging parties, as well as representatives of the DTIC and the Concerned
Academics and the Mediclinic employee representative. At the pre-hearing, the
Concerned Academics indicated that they wished to further submissions at the merger
hearing, and their participation was not opposed by the merging parties.
[48] Subsequent to the pre-hearing, Section 27, a public interest law centre, indicated that it
also wished to make submissions at the merger hearing, and its request to do so was
not opposed by the merging parties.
[49] The Tribunal therefore permitted the Concerned Academics and Section 27 to make
submissions at the merger hearing, which was held on 15 March 2023.
Submissions of the Concerned Academics
[50] At the merger hearing, the Concerned Academics explained that their concerns
[50] At the merger hearing, the Concerned Academics explained that their concerns
regarding the proposed merger arose from the scale of the commercial entities involved,
and the alleged ability of these entities to shape the strategic context within which
competition occurs within the private health sector in South Africa. The Concerned
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Academics submitted that the merger needed to be assessed in the context of the
findings in the Health Market Inquiry in 2019, and argued, in
particular, that:
50.1. The overall healthcare market is characterised by an absence of productive forms
of competition on both the supply and demand sides of the system.
50.2. The private hospital market is highly concentrated, with three hospital groups (one
of which is Mediclinic) owning most of the acute care beds.
50.3.
the provider market.
50.4. The concentrated nature of the hospital market influences tariff negotiations with
medical schemes at both the national and local levels.
50.5. Hospital groups compete for demand by incentivising specialists to locate at their
facilities, and to refer patients for hospital services.
50.6. Attracting demand indirectly in this way is made possible by fee-for-service (FFS)
reimbursement.
50.7. FFS reimbursement makes medical schemes vulnerable to supplier-induced
demand which is unrelated to healthcare needs. This benefits specialists
and hospital groups, and explains a large part of the systemic cost increases faced
by the private health system.
50.8. Medical schemes do not have sufficient countervailing market power to materially
impact on the competitive dynamics of healthcare providers, and consequently
cannot implement al selective
contracting, as an alternative to FFS.
50.9. The medical scheme administrator market is highly, and increasingly,
concentrated, which renders administrators less sensitive to FFS and SID.
50.10. A systemic risk exists for the private healthcare market if corporate group
structures are permitted to straddle both the demand and supply sides of the
market. The resulting conflicts of interest will severely harm the interests of
consumers as problematic vertical coordination will lock out the emergence of
alternatives to FFS.
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[51] The Concerned Academics proceeded to argue that, within this context, the proposed
merger establishes a strategic ownership arrangement which, absent conditions, would
have an unfettered ability to make strategic investments in any part of the South African
private healthcare system. They note that, apart from Mediclinic, Remgro already has
shareholdings in Discovery, MMH and NHG and whilst they accept (in the light of the
updated shareholding information provided by the merger parties) that these latter
shareholdings do not currently reflect controlling interests they argue that there is no
limit on the extent to which the Consortium could in the future deepen its relationship
with these (and other) firms on the funding and provider sides of the market.
[52] The Concerned Academics argued further that the conflicts of interest and competition
risks raised by any such strategic moves would prove harmful to consumers through
continued cost increases, the provision of unnecessary care, a reduced quality of
medical scheme coverage, and reduced healthcare service quality.
[53] Based on these concerns, the Concerned Academics submitted that any expansion of
interests should be curtailed by way of merger conditions, which could take
the form of a requirement on Remgro:
53.1. to disinvest entirely from the relevant parts of the industry;
53.2. not to further expand its investments in the private healthcare sector; or
53.3. to disclose any proposed change in ownership of its investments in the private
healthcare sector so that they can be subjected to evaluation and approval by the
competition authorities.
Submissions of Section 27
[54] Section 27 supported the arguments of the Concerned Academics that the proposed
merger is likely to result in a more concentrated, and less competitive, private healthcare
sector, and to exacerbate the prevalence of SID. It also emphasised that, in terms of
sector, and to exacerbate the prevalence of SID. It also emphasised that, in terms of
section 39(2) of the Constitution, the Act should be interpreted in a manner that would
promote the spirit, purport and objects of the Bill of Rights and referred, in particular,
to section 27 of the Constitution, which enshrines the right of access to healthcare
services.
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[55] Section 27 also argued that the public interest commitments made by the merger parties
were insufficiently specific; unenforceable (insofar as they are dependent on the goodwill
of doctors to perform pro bono surgeries); and did not outweigh the anti-competitive
effects of the proposed merger.
The merge
[56] The merger parties strongly disputed the concerns expressed by both the Concerned
Academics and Section 27
the sake of convenience). They argued that the facts relied on by the concerned parties
(including the relevant findings in the HMI) were incorrect or outdated, and that the
concerns they expressed were either not merger-specific or speculative and
unsubstantiated.
[57] The merging parties disputed, in particular, that Mediclinic is a dominant firm in any
relevant private hospital market, and that the merger will give rise to any horizontal or
vertical co-ordination or change in market structure. They pointed out in this regard that
the merger will not create any horizont
Discovery, MMH and NHG do not vest it with control over any of those firms. They also
disputed the prevalence of FFS and SID; and argued that any SID was caused by the
conduct of doctors, not hospital groups.
[58] As regards the concern raised by the concerned parties regarding future investments by
the Consortium, the merger parties argued that this was vague, speculative and also not
merger-specific. The merger parties also submitted that the incentive of funders in the
private hospital sector is to exercise their countervailing power to resist any unnecessary
costs on the part of providers; and that the concerned parties had not demonstrated that
alleged vertical coordination
Discovery, MMH and NHG. The merging parties also argued
in the manner suggested by the concerned parties would, in any event, be constrained
by MSC as a joint controller of Mediclinic post-merger.
[59] The merger parties therefore concluded that the Commission had been correct in its
[59] The merger parties therefore concluded that the Commission had been correct in its
rejection of the concerns raised by the concerned parties.
[60] As regards the conditions proposed by the Concerned Academics, the merger parties
submitted that these were not only unwarranted, but also discriminatory,
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disproportionate and unconstitutional; and that they in any event fell outside the
jurisdiction of the Tribunal.
ment of the concerns raised by the concerned parties
[61] In our view, the concerned parties are clearly correct in highlighting the importance of
the private healthcare sector from a social and constitutional perspective, and in their
submission that careful consideration is accordingly required in respect of any proposed
merger in this sector. We also agree that the effects of the present merger must be
assessed in the context of the prevailing state of competition in the private healthcare
sector.
[62] In the latter regard, we do not believe that the findings of the Commission in the HMI
can be wholly disregarded on the grounds suggested by the merger parties. By the
same token, however, we are cognisant that certain developments have taken in the
private healthcare sector since the publication of the HMI findings, including the partial
And, more fundamentally, we do not have the necessary factual basis in the present
merger to make any positive findings regarding the allegations made by the concerned
parties regarding the prevailing state of competition in the private healthcare sector,
[63] If we were of the view that it was necessary for us to determine the various factual
disputes between the parties regarding the general state of competition in the private
healthcare sector, we would have required further investigation of the concerned
allegations by the Commission, and further evidence from the concerned parties, the
merger parties and perhaps other parties as well. In this case, however, we do not
believe this is necessary because the concerned parties do not suggest that the various
concerns they have raised regarding the general state of competition in the private
healthcare sector are merger-specific. Therefore, all that is necessary, and appropriate,
case as to why the proposed merger would
case as to why the proposed merger would
have a negative competition or public interest effect on the status quo.
[64] Turning to this case, the concerned parties do not, as we understand them, suggest that
the merger itself will give rise to any horizontal or vertical overlaps. All that will change
as a result of the proposed merger is that Remgro and MSC will jointly control Mediclinic
with a shareholding of 50% each in Bidco, whereas pre-merger Remgro only had a
minority, non-controlling interest of 44.56% in Mediclinic, and MSC did not have any
interests at all in the South African healthcare sector. The concerned parties also appear
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to accept that, as matters stand, Remgro does not have a controlling interest in
Discovery, MMH or NHG; and that Remgro does not have a shareholding in CIH, but
only in i
investment in the Afrocentric group of companies.
[65] In these circumstances, it is hard to see on what basis the proposed merger could give
rise to any horizontal or vertical co-ordination effects as alleged by the concerned
parties.
acquisition of joint control of Mediclinic that gives rise to these concerns, but rather
further strategic investments in the private healthcare sector by Bidco that, they
anticipate, will follow the current transaction.
[66] We have some sympathy for these concerns. We do not regard it as unreasonable for
the concerned parties to anticipate that the Consortium, having decided to acquire joint
control of Mediclinic through Bidco, might use that as a launchpad to make further
investments in the South African healthcare sector in the future. At the same time,
however, it is wholly speculative at this stage whether any such investments will in fact
take place; and, if so, what form they will take, when they will occur and, critically,
whether they will have any negative effects from a competition or public interest
perspective. The concerned parties, perhaps understandably, do not have evidence
regarding any of these matters; all they say, in effect, is that future strategic investments
by the Consortium are likely to occur, and that they are likely, at some point, to have a
negative effect on competition and the public interest.
[67] In our view, however, this concern is an insufficient basis for us to impose any additional
conditions on the merger of the sort that the Concerned Academics propose. Absent
evidence regarding the nature and timing of any further investments by Bidco, and the
effects they might have on competition and the public interest, the findings that the
concerned parties ask us to make in this regard would in our view amount, in the words
concerned parties ask us to make in this regard would in our view amount, in the words
speculation of the kind that cannot
be attributed to any evidential foundation placed before the Tribunal5.
[68] This is particularly so in circumstances where, as the Commission and the merger
parties pointed out, funders such as Discovery and MMH would have no obvious
incentive to participate in the vertical co-ordination postulated by the concerned parties.
Ordinarily, their incentive would be to use their countervailing power to resist any
5 Schumann Sasol (SA) (Pty) Ltd v Price's Daelite (Pty) Ltd (10/CAC/Aug01) [2002] ZACAC 2; [2001-
2002] CPLR 84 (CAC) (27 June 2002) at page 15.
18
unnecessary costs being recovered from them by providers, in order to enable them to
remain competitive in the administrator market. The concerned parties did not
demonstrate that administrators would benefit from paying higher costs than necessary.
The mere fact that Discovery is, according to them, highly profitable, does not show this,
as it is equally consistent with Discovery being a successful competitor.
[69] If, on the other hand, administrators would be
persuaded or forced by Remgro to engage in vertical coordination, this would again need
to be substantiated. They would, for example, need to explain how Remgro could
achieve this without having a controlling stake in these firms, and that it would have an
incentive to do so notwithstanding the negative effect that would have on the
competitiveness of those firms. before us is
evidentially lacking in all these respects.
[70] In their submissions before the Tribunal, the concerned parties placed reliance on
passages from the HMI findings recommending that the competition authorities should
regulate (particularly in the private healthcare sector) more robustly
under the merger control provisions of the Act.6
[71] However, it does not appear to us that the concept of advances the
concern
typically refers to a transaction that amounts to a merger, but whose anti-competitive
effect is only evident when assessed in the context of other mergers consummated by
the acquiring firm. This is captured by section 12A(2)(k) of the Act, which permits the
competition authorities to have regard to other mergers engaged in by the merger parties
in assessing the competitive effects of the merger under investigation.
[72] However, there is no suggestion in this case that the effects of the proposed merger
need to be appraised in the light of any other recent mergers consummated by Remgro
or Mediclinic.
merger assessment to (i) -controlling) interests in Discovery, MMH and
or Mediclinic.
merger assessment to (i) -controlling) interests in Discovery, MMH and
NHG, and (ii) the likely future strategic investments of the Consortium.
[73] We do not regard the first consideration as reflecting a typical theory
given that the existing investments are non-controlling ones. However, labels aside, it
is not controversial that these investments are relevant to the merger assessment,7 and
6 Competition Commission, Health Market Inquiry, Final Findings and Recommendations Report,
September 2019, paras 109-124.
7 See, e.g., sections 12A(2)(i) and (j) of the Act.
19
both the Commission and we have considered them in this case. For the reasons set
out above, we do not find there to be sufficient evidence before us that, even having
regard to these other investments, the proposed merger is likely to lead to negative
competition or public interest effects.
[74] As regards the second consideration, if any future investments by the Consortium
amount to intermediate or large mergers, they will need to be notified to, and approved
by, the competition authorities in due course; and, if they amount to small mergers, the
Commission will be entitled to call for their notification in terms of section 13(3) of the
Act. When the competition authorities assess any such future mergers, they may well,
depending on the timing of those transactions, do so having regard to the present merger
in terms of section 12A(2)(k) of the Act.
be applicable, but that is a matter for assessment in the future merger investigation, not
in the present one when the nature and effects of such future investments are wholly
unknown.
[75] The concerned parties argue that the future investments of the Consortium might not
amount to mergers, and therefore will not be subject to regulation by the competition
authorities under Chapter 3 of the Act before they take place. We agree, but we do not
think that recou As with
-controlling investments, we do not understand the label of a
-controlling investments by the Consortium.
We have, nevertheless, had regard to the possibility of such investments as part of our
forward-looking merger assessment in this case, and have determined, for the reasons
set out above, that there is insufficient evidence before us regarding the nature and
effect of these future investments to regulate them by way of conditions in the present
merger as the concerned parties request.
[76] Indeed, in circumstances where there is no evidence regarding the future investments
[76] Indeed, in circumstances where there is no evidence regarding the future investments
that Bidco might make, and what their competition and public interest effects would be,
the first two conditions proposed by the Concerned Academics (disinvestment and a
prohibition on further investments) might well have the unintended consequence of
preventing existing and/or further investments by Remgro and Bidco that are pro-
competitive in nature.
[77] The third proposed condition (notification of any further investments to the competition
authorities for evaluation and approval) potentially avoids this risk, but raises difficulties
of its own. If the further investment is an intermediate or large merger, it would have to
be notified to the competition authorities for approval anyway; and, if it is a small merger,
the Commission may call for its notification in terms of section 13(3) of the Act if, in the
20
opinion of the Commission, the merger may substantially prevent or lessen competition
or cannot be justified on public interest grounds. We do not have any basis to anticipate
any such notifications at this stage given the absence of any evidence regarding the
nature of any future investments by the Consortium or their possible effects.
[78] Insofar as any future investments by the Consortium do not amount to mergers, the
concerned parties are correct that they would not be subject to merger control under
Chapter 3 of the Act. By the same token, however, it is unclear to us what jurisdiction
the Commission would have to approve any such future investments if they were notified
to it under the third proposed condition. In any event, even if we have the power to
impose such a condition, we do not believe there is a basis to do so in this case given
the absence of any evidence regarding the nature or likely effects of investments in
question. As the merging parties pointed out, it would be hugely burdensome to require
the merging parties to notify any future non-controlling investment for approval by the
competition authorities, and this would also place them at a potentially significant
disadvantage to rivals in the market who would not be subject to a similar regulatory
constraint.
[79] In conclusion, therefore, we find that (save for the risk of information exchange
discussed below) the proposed merger does not raise any competition concerns, and
there is no basis for the imposition of any competition conditions on the approval of the
merger as proposed by the concerned parties.
Competitively sensitive information
[80] The Commission found in its recommendation that there is a risk of competitively-
sensitive information being exchanged between Mediclinic on the one hand, and
Discovery, MMH and NHG on the other
entities. However, the Commission concluded that, in the absence of board
representation by Remgro at Discovery and MMH, there were limited mechanisms
representation by Remgro at Discovery and MMH, there were limited mechanisms
through which such information could be shared.
[81]
but we do not believe that it only arises
at board level. We also note the me the exchange of such
information is, in any event, prohibited by various other laws. In the circumstances, we
have concluded that it would be appropriate to impose a similar prohibition as a merger
condition that would be enforceable under the Act as well. That additional condition is
included as clause 10 in the conditions attached to these reasons.
21
Public interest commitments
[82] As noted above, the public interest commitments tendered by the merger parties were
the product of engagements with the DTIC and the NDoH.
[83]
to raise any significant public interest concerns. Given this context, and the positive
nature of the public interest commitments in question, our focus is more on ensuring
clarity in the meaning of the commitments than on their merger-specificity. Indeed, in
this case, we have not been able to determine from the record to what extent certain of
the commitments are merger-specific.
is that the merger-specificity of the commitments lies in the fact that they will now be the
subject of enforceable merger conditions whereas that would not be the case absent the
merger. We would not necessarily be persuaded by such an argument in circumstances
where the question of merger-specificity was a matter of greater significance.
[84] For the same reasons, we are less concerned in the circumstances of this case that
certain of the commitments, such as the doctor engagement programme, are partly
dependent on factors outside of the control of the merger parties. Similarly, various
details of the way in which the EBS will operate have not yet been determined. In other
cases, this might impact on the weight we would attribute to such commitments.
[85] As regards clarity, we directed certain queries to the merging parties at, and subsequent
to, the hearing, regarding the meaning of certain of the proposed commitments.
Pursuant to those queries, the merging parties revised the wording of the commitments
in question, as reflected in the final conditions attached to these reasons. We are willing
to approve the merger subject to such conditions.
Conclusion
[86] We conclude that, save for the risk of information sharing (which is addressed in the
conditions we have imposed), the proposed transaction does not raise any competition
conditions we have imposed), the proposed transaction does not raise any competition
or public interest concerns. We are nevertheless grateful to the Concerned Academic
and Section 27 for their valuable submissions in this regard.
[87] We therefore approve the transaction subject to the conditions attached as Annexure
to these reasons.
22
19 June 2023
Adv. J Wilson SC Date
Prof. Imraan Valodia and Prof. Fiona Tregenna concurring
Tribunal Case Managers:
Kameel Pancham and Leila Raffee
For the Merging Parties: Michelle Le Roux SC and Tsakane Marolen instructed
by Webber Wentzel, Cliffe Dekker Hofmeyr and
Bowmans
For the Commission: Rakgole Mokolo and Grashum Mutizwa
For the Concerned Academics: Prof. Jonathan Klaaren, Prof. Alex van den Heever, and
Prof. Sharon Fonn
For Section 27: Khanyisa Mapipa and Boane Twala
For the DTIC: Nkonzo Hlatshwayo and Phuti Mashalane
CONFIDENTIAL
_______________________________________________________________________
ANNEXURE A
MANTA BIDCO LIMITED
AND
MEDICLINIC INTERNATIONAL PLC
CASE NUMBER: LM106Sep22
_______________________________________________________________________
CONDITIONS
_______________________________________________________________________
1. DEFINITIONS
1.1 The following expressions shall bear the meanings assigned to them below, and
cognate expressions bear corresponding meanings
1.1.1 " Acquiring Firm" means Bidco;
1.1.2 " Acquiring Group" means Bidco and the Consortium;
1.1.3 " Approval Date" means the date referred to on the Tribunal's merger
clearance certificate (Form CT 10), being the date on which the Merger is
approved in terms of the Competition Act;
1.1.4 " B-BBEE" means the Broad-Based Black Economic Empowerment as
defined in the B-BBEE Act;
1.1.5 " B-BBEE Act" means the Broad-Based Black Economic Empowerment
Act, 53 of 2003, as amended;
1.1.6 " Black" means black people defined in the B-BBEE Act;
1.1.7 " Black-owned businesses" means a business that is held as to at least
51% by Black people;
1.1.8 "Black women-owned business" means a business that is held as to at
least 30% by Black women;
2
1.1.9 "Codes" means the relevant codes of good practice published in terms
of the B-BBEE Act in terms of which Mediclinic's broad-based black
economic empowerment score is measured;
1.1.10 " Commission" means the Competition Commission of South Africa, a
statutory body established in terms of section 19 of the Competition Act;
1.1.11 " Commission Rules" means the Rules for the Conduct of Proceedings
in the Commission;
1.1.12 " Competition Act" means the Competition Act, 89 of 1998, as amended;
1.1.13 Sensiti means, without limitation, (i)
pricing, volume, margin and cost information in relation to particular
products, services, clients and/or suppliers, and (ii) information regarding
budgets, business plans and business strategies.
1.1.14 " Conditions" means these conditions;
1.1.15 " Consortium" means the Relevant Remgro Subsidiaries and SAS;
1.1.16 " Days" means any calendar day other than a Saturday, a Sunday or an
official public holiday in South Africa;
1.1.17 " dtic" means the Department of Trade, Industry and Competition of South
Africa;
1.1.18 "EME" means exempted micro-enterprise as defined in the Codes;
1.1.19 " Employee Benefit Scheme" means a profit participation scheme to be
established for the benefit of Qualifying Workers pursuant to these
Conditions;
1.1.20 " Establishment Period" means 18 (eighteen) months from the
Implementation Date;
1.1.21 " HDP" means a historically disadvantaged person as defined in the
Competition Act;
1.1.22 " Implementation Date" means the date occurring after the last condition
precedent to the transaction is fulfilled or waived, as the case may be,
when the Merger is implemented in accordance with its terms;
1.1.23 " Medical Innovations" means Medical Innovations Proprietary Limited;
3
1.1.24 " Mediclinic" means Mediclinic International plc;
1.1.25 " Medical Training" means training of healthcare and support
professionals working in and supporting healthcare service delivery;
1.1.26 " Mediclinic Southern Africa" means Mediclinic Southern Africa
Proprietary Limited;
1.1.27 " Merged Entity" means Mediclinic subject to the control of the Acquiring
Group following the Implementation Date;
1.1.28 " Merger" means the proposed acquisition by the Acquiring Firm of the
entire issued and to be issued ordinary share capital of Mediclinic other
than the shares held by the Relevant Remgro Subsidiaries by way of a
Scheme of Arrangement under Part 26 of the UK Companies Act, the
shares held being held by the Relevant Remgro Subsidiaries to be
acquired pursuant to a subscription and rollover agreement;
1.1.29 " Merging Parties" means the Acquiring Group and Mediclinic;
1.1.30 " Moratorium Period" means a period of 3 (three) years from the
Implementation Date and includes the period between the Approval Date
and the Implementation Date;
1.1.31 " NDoH" means the South African National Department of Health;
1.1.32 " Nurses Training" means the training of nurses at Mediclinic's accredited
nursing training centres;
1.1.33 " QSE" means a qualifying small enterprise as defined in the Codes;
1.1.34 " Qualifying Workers" means all Workers in South Africa in the
continuous employ of Mediclinic Southern Africa and its subsidiaries and
Medical Innovations with more than 1 (one) year tenure regardless of
grade / position, excluding all Workers who are management employees
sharing in a short term incentive plan;
1.1.35 " Reference ESP" means the notional employee share plan as more fully
described in line item 3 of Annexure A.1;
1.1.36 " Relevant Remgro Subsidiaries" means Remgro Health, RHH and
Remgro Jersey;
1.1.37 " Remgro" means Remgro Limited;
4
1.1.38 " Remgro Health" means Remgro Health Limited;
1.1.39 " Remgro Jersey" means Remgro Jersey GBP Limited;
1.1.40 " RHH" means Remgro Healthcare Holdings Proprietary Limited;
1.1.41 " SAS" means SAS Shipping Agencies Services S.à.r.l.;
1.1.42 " South Africa" means the Republic of South Africa;
1.1.43 " Tribunal" means the Competition Tribunal of South Africa, a statutory
body established in terms of section 26 of the Competition Act;
1.1.44 " Tribunal Rules" means the Rules for the Conduct of Proceedings in the
Tribunal;
1.1.45 " UK Companies Act" means the Companies Act 2006 of the United
Kingdom, as amended from time to time;
1.1.46 " Unjani Clinics" means Unjani Clinics NPC, a non-profit company
(registration number 2014/089277/08) and a registered public benefit
organisation (PBO 930047735) established to implement and manage the
Unjani Clinic Network;
1.1.47 " WDGMC" means Wits Donald Gordon Medical Centre Proprietary
Limited, a public-private partnership between Mediclinic and Wits
University, in respect of which Mediclinic owns a 49.9% shareholding;
1.1.48 " Wits University" means the University of the Witwatersrand,
Johannesburg; and
1.1.49 " Worker" means an employee as defined in the Labour Relations Act 66
of 1995, as amended.
2. COLLABORATION WITH THE SOUTH AFRICAN PUBLIC HEALTH SECTOR
2.1 Mediclinic shall provide support on addressing surgical backlogs in the South
African public healthcare sector by performing, with partnering practitioners and
specialists, at least 1,000 (one thousand) pro bono surgeries at its facilities in
South Africa in aggregate over its next 5 (five) financial years commencing
1 April 2023 (subject to appropriate practitioners and specialists being available
to perform the surgeries in line with healthcare practice).
5
2.2 The manner in which the aforementioned pro bono surgeries in clause 2.1. are
performed by Mediclinic is contingent on a variety of factors, many of which are
Notwithstanding, Mediclinic undertakes to consult
with the relevant provincial departments of health where Mediclinic has a
presence regarding the nature and geographical location of such pro bono
surgeries. The recommendations timeously made by the NDoH, to the extent
reasonably possible, affordable and practical, will be considered in delivering
on this condition.
2.3 The Merging Parties confirm that the Merger will not negatively impact
Mediclinic's collaboration with the South African public healthcare sector.
Mediclinic shall continue to collaborate and engage with public healthcare
sector stakeholders on the components of a sustainable healthcare system.
3. DOCTOR ENGAGEMENT PROGRAMME
3.1 In furtherance of the undertakings set out in clause 2, and in consultation with
the NDoH, Mediclinic undertakes to implement a programme within its network
of hospitals, aimed at engaging doctors and encouraging them to assist with pro
bono surgeries.
3.2 The Mediclinic Industry Affairs Executive shall manage the aforementioned
undertaking in clause 3.1, in collaboration with the Mediclinic existing doctor
relationship management team, to ensure that the objectives of this clause are
achieved and effectively implemented.
4. SKILLS DEVELOPMENT AND CORPORATE SOCIAL RESPONSIBILITY
INITIATIVES
Funding Allocations for Medical Training
4.1 Mediclinic shall, for its next 3 (three) financial years commencing 1 April 2023:
4.1.1 spend at least R22.5 million (twenty-two million five hundred thousand
Rand) on Medical Training at WDGMC in aggregate over the period;
4.1.2 sponsor training grants and bursaries for Medical Training, of not less than
R30 million (thirty million Rand) in aggregate over the period, taking into
account, inter alia, information on individuals in need, to be provided
account, inter alia, information on individuals in need, to be provided
timeously to Mediclinic by the NDoH from time to time; and
4.1.3 make donations of not less than R15 million (fifteen million Rand) in
aggregate over the period to the National Department of Health Public
6
Health Enhancement Fund or similar South African Medical Training
focused institution.
Nurses Training
4.2 Mediclinic shall, for its next 5 (five) financial years commencing on 1 April 2023,
cover the full annual tuition costs of such number of nursing students that will
comprise, when aggregating the number of nursing students whose tuition costs
will be covered per annum over the 5 (five) financial year period, no fewer than
1,700 (one thousand seven hundred) nursing students, at an approximate cost
of R80 000 000 (eighty million Rand).1
5. ENTERPRISE AND SUPPLIER DEVELOPMENT: ENHANCING THE SOUTH
AFRICAN HEALTHCARE SECTOR
Mediclinic shall, during its next 5 (five) financial years commencing 1 April 2023,
spend at least an aggregate total amount of R40 million (forty million Rand) in the
form of grants or loans to support Unjani Clinics (or similar facilities in underserved
communities) in the establishment or upgrading of at least 20 (twenty) clinics and/or
mobile health units in aggregate aimed at advancing the South African healthcare
sector, particularly in underserviced areas. When selecting such facilities and/or
areas, Mediclinic will consider timeous input from the NDoH as to the underserviced
areas most in need.
6. PROCUREMENT
Mediclinic shall in aggregate for its next 5 (five) financial years commencing
1 April 2023, spend not less than R5 billion (five billion Rand) on procuring from Black-
owned businesses, of which amount Mediclinic shall spend no less than R2.5 billion
(two point five billion Rand) on procuring from Black-owned EMEs and/or QSEs.
These spend commitments are made on the basis that the goods and services that
Mediclinic requires to be procured are available on reasonable, practical and
competitive terms that comply with regulatory requirements (as applicable) and
Mediclinic's reasonable requirements, particularly regarding availability, quantity,
quality aligned with market standards, counterparty risk and pricing.
1 1,700). [As an illustrative
1 1,700). [As an illustrative
example, 340 students paid for per year will be (5 x 340 => 1,700), or another illustrative example could be (240 + 290 +
340 + 390 + 440 1,700)].
7
7. CAPITAL EXPENDITURE
Mediclinic shall, for its next 5 (five) financial years commencing 1 April 2023, incur no
less than R5 billion (five billion Rand) of capital expenditure in its South African
operations.
8. EMPLOYMENT
8.1 Subject to the provisions of clause 8.2 below, the Merged Entity shall not
retrench any permanent or fixed-term contract employees as a result of the
Merger ("Merger-specific retrenchments") during the Moratorium Period.
8.2 The undertaking provided in paragraph 8.1 above means that no retrenchments
will result as a consequence of the implementation of the Merger. For the sake
of clarity, Merger-specific retrenchments do not include (i) voluntary
retrenchment and/or voluntary separation arrangements; (ii) voluntary early
retirement packages; (iii) unreasonable refusals to be redeployed in accordance
with the provisions of the Labour Relations Act; (iv) resignations or retirements
in the ordinary course of business; (v) retrenchments lawfully effected for
operational requirements (for the purposes of the Labour Relations Act)
unrelated to the Merger (vi) terminations in the ordinary course of business,
including, but not limited to, dismissals as a result of misconduct or poor
performance; and (vii) any decision not to renew or extend a contract of a fixed-
term third party contract employee or contract with a third party.
9. ESTABLISHMENT OF AN EMPLOYEE BENEFIT SCHEME
9.1 By the end of the Establishment Period, Mediclinic Southern Africa shall be
obliged to establish, for the benefit of Qualifying Workers, an Employee Benefit
Scheme in accordance with the key design principles set out in Annexure A.1.
10. INFORMATION SHARING
10.1 The Merging Parties shall take the following measures to address the risk of
information sharing post-Merger:
10.1.1 Any director, employee or representative of Remgro (or any of its
subsidiaries) who has or obtains access to Competitively Sensitive
Information relating to Mediclinic Southern Africa shall keep such
Information relating to Mediclinic Southern Africa shall keep such
Competitively Sensitive Information confidential, and shall, in particular,
not disclose such Competitively Sensitive Information to any director,
employee or representative of Discovery Holdings (Pty) Ltd ,
8
Momentum Metropolitan Holdings Limited or National Healthcare
Group (Pty) Ltd ( .
10.1.2 Any director, employee or representative of Remgro (or any of its
subsidiaries) who has or obtains access to Competitively Sensitive
Information relating to Discovery, MMH or NHG shall keep such
Competitively Sensitive Information confidential, and, in particular, shall
not disclose it to any director, employee or representative of Mediclinic
Southern Africa, Mediclinic or Bidco.
10.1.3 In the event that, and/or for so long as, a representative of Remgro (or
any of its subsidiaries) becomes, or is, a director of Mediclinic Southern
Africa, Mediclinic or Bidco, Remgro shall ensure that such person signs a
written confidentiality undertaking confi
terms of clause 10.1.1. above.
10.1.4 In the event that, and/or for so long as, a representative of Remgro (or
any of its subsidiaries) becomes, or is, a director of Discovery, MMH or
NHG, Remgro shall ensure that such person signs a written confidentiality
undertaking obligations in terms of clause
10.1.2. above.
11. MONITORING OF COMPLIANCE WITH THE CONDITIONS
11.1 The Merged Entity shall inform the Commission in writing of the Implementation
Date within 5 (five) Days of the Implementation Date.
11.2 The Merged Entity shall, within 30 (thirty) Days of the end of Mediclinic's
financial year-end, for its next 5 (five) financial years commencing 1 April 2023,
provide to the Commission a report detailing its progress regarding the
compliance with the Conditions. This report shall be accompanied by an affidavit
attested to by a senior official of the Merged Entity, confirming the report's
accuracy.
11.3 The Commission may request additional information from the Merging Parties,
which the Commission may reasonably deem necessary to monitor the extent
of compliance with the Conditions.
11.4 Any person who believes that the Merging Parties have not complied with or
have acted in breach of the Conditions may approach the Commission with their
have acted in breach of the Conditions may approach the Commission with their
complaint. If the Commission determines that there has been an apparent
9
breach by the Merging Parties of these Conditions, the matter shall be dealt with
in terms of clause 12 below.
12. VARIATION OF THE CONDITIONS
The Merging Parties or the Commission may at any time, on good cause shown
(including any adverse effect on the Merged Entity's financial performance or
macroeconomic or political conditions or healthcare or other applicable regulations
impacting the Merged Entity's operations, for example, the impact of COVID-19) and
on notice to the other, apply to the Tribunal for any of the Conditions to be waived,
relaxed, modified or substituted.
13. APPARENT BREACH
If the Merging Parties appear to have breached the Conditions, or if the Commission
determines that there has been an apparent breach by the Merging Parties of any of
the Conditions, this 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.
14. GENERAL
All correspondence concerning the Conditions must be submitted to the following e-
mail addresses: mergerconditions@compcom.co.za, ministry@thedtic.gov.za and
nicholas.crisp@health.gov.za.
10
ANNEXURE A.1
Design Principle Applicable Criteria
1 Structure o To be established for the benefit of Qualifying
Workers, which provides Qualifying Workers
with economic rights associated with the profit
after tax produced by, or within, the relevant
constituent components of the Mediclinic
Southern Africa group and Medical
Innovations.
2 Quantum of benefits o The economic benefits due to Qualifying
Workers in terms of the Employee Benefit
Scheme will be, at least, equivalent to the
economic benefits due to Qualifying Workers
in terms of the Reference ESP, meaning that
the net present value of cash flows, less any
remaining funding or liabilities ("Net Cash
Flows"), due to Qualifying Workers in terms of
the Employee Benefit Scheme will or will likely
be the same or higher than the Net Cash Flows
due to Qualifying Workers in terms of the
Reference ESP.
3 Reference ESP For the purpose of line item 2 above, the Reference
ESP is a notional Employee Share Plan which:
o is established as an evergreen employee
share trust for the benefit of Qualifying
Workers;
o acquires and holds shares in Mediclinic
Southern Africa as is equal to 5% of the total
issued shares in Mediclinic Southern Africa,
measured on a fully diluted basis2; and
o is vendor-financed on market-related terms.
4 Funding of the Employee Benefit
Scheme
o The Employee Benefit Scheme will not have
any funding associated with it.
5 Cost to Qualifying Workers o The cost to Qualifying Workers will be R 0 (nil
/ zero Rand).
6 Duration o The Employee Benefit Scheme will endure on
an evergreen basis.
o Termination of the Employee Benefit Scheme,
for whatever reason, will result in the
Employee Benefit Scheme being
compensated for the value of the economic
benefits forfeited, with such compensation to
be held as an asset and used to continue to
pay benefits to Qualifying Workers.
7 Participants o Qualifying Workers
pay benefits to Qualifying Workers.
7 Participants o Qualifying Workers
2 The Reference ESP will notionally hold 5% of the total number of shares then in issue, after the issue of new shares to the
Reference ESP. For the avoidance of doubt, shares
) = 5%. [As an illustrative example, 100 shares prior to Reference ESP with 5.2632 new shares
issued will be (5.2632 / (100 + 5.2632)) = 5%].
11
Design Principle Applicable Criteria
8 Benefits o Qualifying Workers will be entitled to receive a
share of the profit after tax produced by or
within the Mediclinic Southern Africa group, or
constitutent components of the Mediclinic
Southern Africa group, on a basis that satisfies
the provisions of line item 2 above.