COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM100Aug22
In the matter between:
Sanlam Emerging Markets Proprietary Limited
and Allianz Europe B.V.
Primary Acquiring Firms
and
SAN JV (RF) Proprietary Limited Primary Target Firm
[1] On 15 August 2023, the Competition Tribunal (“Tribunal”) conditionally
approved the large merger whereby Sanlam Eme rging Markets Proprietary
Limited (“SEM”) and Allianz Europe B.V. ("Allianz Europe") intend to jointly
acquire control of SAN JV (RF) Proprietary Limited (“SAN JV”).
The parties and their activities
[2] The primary acquiring firms are SEM and Allianz Europe.
[3] SEM is a South African company which is wholly owned by Sanlam Life
Insurance Limited (“Sanlam Life”). Sanlam Life is, in turn, wholly owned by
Sanlam Limited ("Sanlam"). Sanlam is a public company listed on the JSE
Limited, the Namibian Stock Exchange and the A2X, and is not controlled by
Panel : J Wilson (Presiding Member)
: F Tregenna (Tribunal Member)
: I Valodia (Tribunal Member)
Heard on : 22 February, 9 May, 14 August 2023
Last date of submission : 10 August 2023
Order issued on : 15 August 2023
Reasons issued on : 17 August 2023
REASONS FOR DECISION
any firms. Sanlam and its subsidiaries are referred to below as the “Sanlam
Group”.
[4] The Sanlam Group is an international financial services group comprising
several insurers, financial services providers and other financial institutions in
and outside South Africa . SEM is Sanlam’s financial services offering in
emerging markets outside of South Africa, and its focus areas include retail and
group life insurance and related business, credit, general insurance and
investment management.
[5] Allianz Europe is a corporation registered in the Netherlands and is controlled
by Allianz SE ("Allianz"), a public company incorporated in Germany. Allianz
does not have any controlling shareholders. Allianz and its subsidiaries are
referred to below as the “Allianz Group”
[6] The Allianz Group is a global integrated financial services group which offers a
wide range of life and non -life insurance products to both retail and corporate
customers.
[7] The primary target firm is SAN JV, a company registered in South Africa. SAN
JV is currently controlled by SEM, which has a shareholding of 90% in SAN JV.
The remaining 10% shareholding in SAN JV is currently held by Santam Limited
(“Santam”), a provider of short-term insurance products in the Sanlam Group.
[8] SAN JV is a holding company for the Sanlam Group’s strategic investments in
Africa, and does not carry out any direct commercial activities in South Africa.
Proposed transaction and rationale
The transaction
[9] Pursuant to the proposed transaction, the Sanlam Group and Allianz Group will
contribute certain of their respective African operations to a South African
incorporated joint venture holding company called Sanlam Allianz Africa . The
merging parties submitted in their merger filing that Sanlam Allianz Africa will
operate as a pan -African life and general insurance joint venture across the
African continent, but excluding South Africa. They stated that Sanlam Allianz
Africa will not have any activities in South Africa , and that the merging parties’
existing operations in South Africa will be excluded from the joint venture.
[10] As discussed further below, it turned out that Sanlam Allianz Africa will in fact
have activities (albeit limited) in South Africa . The merging parties’ failure to
indicate this in their merger filing or during the course of the Commission’s initial
merger investigation led to a n unnecessary delay in the consideration and
determination of this merger.
[11] The companies that the Sanlam Group (through SEM) and the Allianz Group
(through Allianz Europe) will contribute to Sanlam Allianz Africa, in exchange
for shares in Sanlam Allianz Africa, are listed in the Contribution Agreement
between the parties.
[12] Insofar as the Sanlam Group is concerned, the companies that it will contribute
to Sanlam Allianz Africa are those entities through which the Sanlam Group
carries out its insurance and asset management businesses in the following
African jurisdictions: Angola, Benin, Botswana, Burkina Faso, Cameroon,
Congo, Gabon, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi,
Mali, Mauritius, Morocco, Mozambique, Namibia, Niger, N igeria, Rwanda,
Senegal, Tanzania, Togo, Uganda and Zambia (collectively the "Sanlam
Transaction Assets"). The shares of SEM and Santam in SAN JV will also be
contributed to Sanlam Allianz Africa.
[13] Insofar as the Allianz Group is concerned, the companies that it will contribute
to Sanlam Allianz Africa are those entities through which the Allianz Group
carries out insurance business in the following African jurisdictions: Burundi,
Cameroon, Egypt, Ghana, Ivory Coast, Kenya, Madagascar, Mauritius,
Morocco, Nigeria, Senegal, Tanzania, and Uganda (collectively the "Allianz
Transaction Assets"). The Allianz Group will not contribute any of its assets in
South Africa to the joint venture.
[14] Sanlam Allianz Africa is a South African company that has been established as
a holding company for the purposes of the Proposed Transaction, and is
currently a wholly -owned subsidiary of SEM. In exchange for the sale of the
Sanlam Transaction Assets, including SAN JV, SEM will receive "A" shares in
Sanlam Allianz Africa; and, in exchange for the sale of the Allianz Transaction
Assets, Allianz Europe will receive "B" shares in Sanlam Allianz Africa. SEM
will hold "A" shares granting it a 51%-60% interest in Sanlam Allianz Africa; and
Allianz Europe will hold "B" shares granting it a 40% -49% interest in Sanlam
Allianz Africa. The precise shareholdings of the parties in Sanlam Allianz Africa
will depend on the value of the ir respective assets after post -closing
adjustments to the valuations are made.
[15] However, irrespective of the precise level of the parties’ shareholding in Sanlam
Allianz Africa , the "A" shares will grant SEM control rights substantially
equivalent to that of a shareholder that owns 51% of the shares in Sanlam
Allianz Africa ; and the "B" shares will grant Allianz Europe control rights
substantially equivalent to that of a shareholder that owns 49% of the shares in
Sanlam Allianz Africa (for so long as Allianz Europe holds "B" shares that
constitute more than 35% of Sanlam Allianz Africa‘s issued share capital).
[16] Pursuant to the proposed transaction, Sanlam Allianz Africa, and the assets it
acquires, will be jointly controlled by the Sanlam Group and the Allianz Group
through their respective shareholding of "A" shares and "B" shares and
associated rights.
Rationale
[17] The merging parties submitted that the proposed transaction will enable them
to enhance their capabilities in existing markets where they are present, and to
expand their footprints to compete more effectively in certain key jurisdictions
on the African continent.
[18] The merging parties foresee the strategic benefits of entering into the Proposed
[18] The merging parties foresee the strategic benefits of entering into the Proposed
Transaction as including the following:
a. Enabling a strategic partnership between a pan-African insurance group
and an established international financial services group and insurer;
b. Leveraging the Sanlam Group’s experience, expertise, and footprint in
Africa and the Allianz Group’s broad international expertise and
capabilities;
c. Achieving benefits associated with economies of scale , as well as
improved geographical and product diversification;
d. Offering a tailored range of products to suit the needs of local customers
across the African continent at competitive prices which reflect the scale
benefits derived from the proposed transaction;
e. Maximising value creation for both the Sanlam Group and the Allianz
Group and their respective stakeholders; and
f. Benefiting from knowledge sharing, a combined platform and other
potential synergies for Sanlam Allianz Africa.
The Commission’s initial competition assessment
[19] In its initial investigation, the Commission found that, in South Africa, the
Sanlam Group and the Allianz Group are both active in the provision of short -
term insurance products.
[20] However, based on the merger filing, the Commission found that the proposed
transaction did not involve any of the businesses of the Sanlam Group and the
Allianz Group in South Africa, and accordingly that the merger would not create
any horizontal overlap between these groups in the provision of short-term
insurance products in South Africa. The Commission also did not identify any
vertical relationship between the Sanlam Group and the Allianz Group in South
Africa.
[21] The Commission considered whether the multi-market contact that the Sanlam
Group and the Allianz Group would have as a result of the proposed transaction
might impact on competition between them in South Africa in relation to short-
term insurance products. The Commission found that the market shares of the
Sanlam Group and the Allianz Group in the provision of short -term insurance
products in South Africa is relatively low, ranging between 15 – 25% and below
5% respectively, and that there are numerous other providers of short -term
insurance in South Africa. The Commission concluded that, given these
features of the market, the proposed merger is unlikely to result in coordination
between the groups in South Africa.
[22] The Commission was however concerned that, given the ongoing competitive
relationship between the Sanlam Group and the Allianz Group in South Africa,
the joint venture c ould potentially be used as a vehicle to exchange
competitively sensitive information between the Groups in South Africa. In order
to alleviate these concerns, the Commission agreed with the merging parties
that the approval of the proposed merger should be subject to conditions that
limit the flow of competitively-sensitive information between the Sanlam Group
and the Allianz Group.
[23] These conditions provide that, for as long as the Sanlam Group and the Allianz
Group can appoint or nominate individuals to the board of Sanlam Allianz Africa
as directors, they will ensure that their nominees are not directly involved in the
day-to-day management of the Groups’ competing businesses in South Africa.
In addition, the representatives appointed by the Groups to the board of Sanlam
Allianz Africa will sign confidentiality undertakings confirming that they will not
disclose to each other competi tively sensitive information relating to their
competing businesses in South Africa.
The Commission’s public interest assessment
Effect on employment
[24] The merging parties submitted that the proposed transaction will not have any
negative effect on employment in South Africa as it will not result in any
retrenchments in South Africa.
[25] The Commission noted that the merging parties will not be active in South
Africa, and also confirmed that the employees of the Sanlam Group had not
raised any concerns regarding the proposed transaction.
[26] The Commission therefore concluded that the proposed transaction does not
raise any employment concerns.
Effect on the spread of ownership
[27] The Commission found that in terms of Sanlam's Broad Based Black Economic
Empowerment Certificate, black ownership in Sanlam is as follows:
27.1 voting rights: 55.36% on a flow -through basis, and 55.75% on a
modified flow-through basis; and
27.2 economic interest: 49.00% on a flow -through basis, and 49.04%
on a modified flow-through basis.
[28] The Commission found that Allianz Europe does not have any ownership by
historically disadvantaged persons.
[29] Having regard to these percentages, and the fact that, p ost-merger, SEM will
hold 51-59% of the shares in Sanlam Allianz Africa, the Commission concluded
that the proposed transaction does not raise any public interest concerns from
a transfer of ownership perspective.
[30] The Commission also found that the proposed merger does not raise any other
public interest concerns.
Tribunal’s assessment and further merger investigation
[31] The Tribunal was satisfied with the Commission’s conclusions regarding the
competition and public interest effects of the proposed merger based on the
merging parties’ statement in the merger filing that Sanlam Allianz Africa will
not have any activities in South Africa.
[32] However, at the merger hearing on 28 February 2023, the Tribunal noted that,
based on the merging parties’ statement in their merger filing that Sanlam
Allianz Africa would not have any activities in South Africa, the Commission’s
analysis had been premised on that assumption. However, there was no
limitation on Sanlam Allianz Africa deciding, post -merger, to conduct activities
in South Africa , in which event the competitive consequences of such entry
would not have been investigated by the Commission or considered by the
Tribunal. The Tribunal therefore requested the Commission and the merging
parties to propose a condition to address this concern.
[33] The proposals made by the merging parties subsequent to the merger hearing
did not appear to the Tribunal to address this concern adequately, and t he
Tribunal therefore afforded the merging parties and the Commission an
opportunity to comment on a proposed condition that Sanlam Allianz Africa
would not sell any insurance, financial or other products or services in South
Africa.
[34] This proposal elicited a response from the merging parties that the condition
should be amended to cater for the activities in South Africa that may relate to
SEM's 50% shareholding in aYo Holdings Limited ("aYo"), a Mauritian
company, which shareholding is part of the Sanlam Transaction Assets being
contributed to Sanlam Allianz Africa. aYo is a joint venture between SEM and
MTN (Dubai) Limited, a subsidiary of MTN Group Limited.
[35] The Tribunal then queried how the se proposed activities were consistent with
the statement in the merger filing that Sanlam Allianz Africa would not conduct
the statement in the merger filing that Sanlam Allianz Africa would not conduct
any activities in South Africa. The merging parties responded that, at the time
the merger notification was filed on 22 August 2022, the aYo joint venture had
not yet been implemented, and was still subject to merger approval in various
jurisdictions. In addition, aYo’s South African operation had not, to date,
commenced business. The merging parties also stated that aYo would only
conduct distribution (and not underwriting) activities in South Africa.
[36] The Tribunal did not regard this as a satisfactory explanation given the clear
intent of aYo to launch distribution operations in South Africa in the near term
future. Furthermore, the merging parties’ failure to notify the Commission of
these proposed activities meant that the Commission had not had the
opportunity to investigate their potential competitive effects in South Africa,
including their potential effect on the incentives of the Sanlam Group and the
Allianz Group to compete in the South African market.
[37] In the circumstances, and in an attempt to progress matters , the Tribunal
reconvened the merger hearing on 9 May 2023 in order to hear further
submissions from the Commission and the merging parties on the conditions
that should be attached to the merger. At that hearing, the Commission
confirmed that it had not investigated the potential effects of the proposed entry
of aYo into the South African market. The Tribunal therefore suggested various
potential options to the merging parties, including staying the Tribunal
proceedings until the Commission had carried out its further investigation, or
excluding SEM’s shareholding in the aYo joint venture from th e proposed
transaction.
[38] The merging parties subsequently chose the first option, and the Commission
proceeded to conduct its further merger investigation.
[39] On 3 August 2023, the Commission submitted its suppleme ntary
recommendation to the Tribunal. The Commission reported that Sanlam Allianz
Africa will conduct business in South Africa through aYo Intermediaries
Africa will conduct business in South Africa through aYo Intermediaries
Proprietary Limited (“aYo SA”) , a South African subsidiary of aYo. aYo SA
holds short-term and long-term insurance licences that permit it to market and
distribute (but not underwrite) short-term and long-term insurance products in
South Africa. aYo SA will distribute Sanlam and Santam insurance products
exclusively to MTN customers via the MTN network. The short-term insurance
products it will distribute are device insurance, motor vehicle comprehensive
insurance and liability cover. The l ong-term insurance products include life
insurance, funeral insurance as well as protection against contract liability and
life insurance offered on an employee benefit basis.
Vertical assessment
[40] Given the proposed activities of aYo SA , t he Commission found that the
proposed transaction gives rise to a vertical overlap in South Africa as Sanlam
and Allianz are both active in the upstream market for underwriting of insurance
products, whilst aYo SA will be active in the downstream market for the
distribution of those insurance products.
[41] The Commission assessed input foreclosure separately for the short-term and
long-term insurance markets.
[42] As regards the short-term insurance market, the Commission found that the
Sanlam Group and the Allianz Group have market shares ranging between 20
– 30% and below 5% respectively, in the upstream market for underwriting
short-term insurance products. It found that there are also various other notable
upstream players in this market , including Guardrisk, Hollard, Old Mutual,
OUTsurance, and Bryte.
[43] The Commission also noted that, in 2022, Santam acquired the MTN portfolio
comprising the device insurance policies marketed and distributed by MTN and
underwritten by Guardrisk. As a result of that transaction MTN will cease writing
new business on behalf of Santam.
[44] The Commission concluded that there are no other downstream insurance
distributors that will be foreclosed as a result of the entry of aYo SA in to the
insurance distribution market since the device insurance distribution to be
performed by aYo SA was previously performed by MTN and was therefore not
available in any contestable market.
[45] As regards the long-term insurance market, the Commission found that Sanlam
has shares of less than 15% in the provision of different life insurance policies
(funeral assistance policies, disability policies, life policies and total life
policies), whilst Allianz does not provide any life insurance products in South
Africa. The Commission found that Sanlam competes against numerous
players in the long-term insurance market, including Old Mutual, Liberty Life,
Clientele, 1Life, Assupol, and Budget Life, amongst others.
[46] The Commission considered whether the merged entity will have the ability to
foreclose the downstream competitors of aYo SA from accessing underwriting
of long-term insurance products from Sanlam post the implementation of the
proposed transaction.
[47] The Commission note d in this regard that aYo SA is a new entrant into the
downstream market and will be distributing Sanlam life products exclusively to
MTN customers via the MTN network, in circumstances where MTN was
previously performing the same function in-house. The Commission therefore
found that there are no other downstream distributors that will be foreclosed
from access to Sanlam life insurance products as a result of the entry of aYo
SA.
[48] The Commission also assessed customer foreclosure in both the life and non-
life insurance markets – in particular, whether the merged entity will have the
ability to foreclose upstream competitors of Sanlam and Allianz from accessing
aYo SA as a distributor of insurance products post-merger.
[49] The Commission concluded that th ere will not be any foreclosure effect
because aYo SA has only recently entered the market , and will not be
distributing the insurance products of any insurers other than Sanlam and
Santam. Furthermore, aYo SA will be distributing insurance products
Santam. Furthermore, aYo SA will be distributing insurance products
exclusively to MTN subscribers via the MTN network , and will not have any
corporate customers in South Africa. As a result, no upstream insurance
companies will be foreclosed by the entry of aYo in the downstream market.
[50] In conclusion, the Commission found that the entry of aYo SA into the South
African market is unlikely to give rise to anti-competitive input or customer
foreclose effects.
Change in incentives
[51] The Commission also considered whether the entry of aYo SA into the South
African market might affect the incentive of the Allianz Group (as a partner in
the Sanlam Allianz Africa joint venture) to enter into the South African individual
insurance distribution market in the future.
[52] The Commission found that the Allianz Group had historically explored entering
this market, but had decided not to do so for legitimate commercial reasons.
The Commission did not find any evidence that Allianz has considered any such
entry in the last 3 years. The Commission therefore concluded that the entry
of aYo SA into the South Africa market is unlikely to affect the incentives of the
Allianz Group to compete with the Sanlam Group in South Africa.
[53] The Commission was nevertheless of the view that , in order to guard against
the introduction of any activities by Sanlam Allianz Africa in South Africa other
than those investigated in relation to aYo SA, an express condition should be
imposed limiting Sanlam Allianz Africa’s activities in South Africa to the
distribution of insurance products on behalf of the Sanlam Group through aYo
SA. The merging parties agreed to the imposition of this condition.
[54] The Tribunal agrees, based on the further investigation conducted by the
Commission and the further condition agreed by the Commission and the
merging parties, that the proposed merger is unlikely to raise any significant
competition concerns.
Conclusion
[55] Subject to the conditions referred to above, the Tribunal concludes that the
proposedtransactionis unlikely to lessen or prevent competition in any relevant
market and does not raise any public interest concerns.
[56] The Tribunal accordingly approves the proposed merger subject to the
conditions annexed hereto as Annexure A.
1717August2023
Presiding Member
Adv.Jerome WilsonSCSC
Date
Concurring: Professor Fiona Tregennaand Professor Imraan Valodia
Tribunal Case Managers:Sinethemba Mbeki, Baneng Naape, ThTheodora
Michaletos and Matshidiso Tseki
For the Merger
erParties: Daryl Dingley, Busisiwe Masango, Sarah Manley
and Monde Mbali of Webber Wentzel withDerek
Lotter, Sivuyile Lutshiti,and Lital Avivi of Bowmans
For the Competition
Commission:
Nolubabalo Myoli and Grashum Mutizwa
Signed by:Jerome Wilson
Signed at:2023-08-17 10:14:20 +02:00
Reason:Witnessing Jerome Wilson