COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM162Jan24
Nedbank Group Limited Primary Acquiring Firm
And
Eqstra Investment Holdings (Pty) Ltd Primary Target Firm
Introduction
Panel : Liberty Mncube(Presiding Member)
: Imraan Valodia(Tribunal Member)
: Anisa Kessery(Tribunal Member)
Heard on : 16 April 2024
Order issued on : 16 April 2024
Reasons issued on : 14 May 2024
REASONS FOR DECISION
[1] On 16 April 2024, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger in terms of which Nedbank Group Limited (“Nedbank”)
intends to acquire 100% shares in Eqstra Investment Holdings Proprietary
Limited (“Eqstra”).
[2] On completion of the proposed transaction, Nedbank will exercise sole control
of Eqstra.
It
competition tribunal
SOUTH AFRICA
Parties and Activities
Primary acquiring firm
[3] The primary acquiring firm is Nedbank, a public company incorporated in
accordance with the laws of South Africa. Nedbank is a public company listed
on the Johannesburg Stock Exchange and is not controlled by any single entity
or individual.
[4] Nedbank directly controls the following firms in South Africa:
3.1. Nedbank Limited;
3.2. Nedbank Group Insurance Holdings Limited; and
3.3. Nedbank Group Insurance Company.
[5] Nedbank and all the firms controlled by it are collectively referred to below as
the “Acquiring Group”.
[6] The Acquiring Group offers banking and financial services. Of relevance to the
proposed transaction is the Acquiring Group’s fleet management services
which comprises of, but not limited to, (i) selection of the optimum vehicle for
the task, taking total life costs into account rather than only the purchase price
of the of the vehicle, (ii) disposing of vehicles, (iii) managing cost control, (v)
monitor maintenance, (iv) managing information online to allow expectation to
be managed.
Primary target firm
[7] The primary target firm is Eqstra, a private company incorporated in accordance
with the laws of South Africa.
[8] Eqstra is wholly owned by enX Group Limited (“ enX”).
[9] Eqstra controls the following firms in South Africa:
9.1. ;
9.2.
9.3.
9.4.
9.5.
[10] Eqstra including their subsidiaries and controllers will collectively be referred to
as the “Target Businesses”.
Proposed Transaction and Rationale
Transaction
[11] Nedbank intends to acquire a 100% of the issued share capital of Eqstra. Upon
implementation of the proposed transaction, Eqstra will be solely controlled by
Nedbank.
Rationale
[12]
[13]
Competition Assessment
Overlap
[14] The proposed transaction results in horizontal and vertical overlap between the
activities of the merging parties.
[15] The horizontal overlap arises as both the merging parties provide vehicle
leasing and fleet management services.
[16] The vertical overlap arises as the Acquiring Group provides fleet financing
services to firms that are active in the vehicle leasing and fleet management
services such as Eqstra.
Relevant Product Market
[17] In its assessment of product market, the Competition Commission considered
its previous decision where it found that in terms of rental/leasing, different
types of vehicles are not directly substitutable with each other from a
customer/demand perspective.1
[18] The Commission further considered the transactions between Absa Bank
Limited and Avena Leaseplan South Africa Proprietary Limited2 and Bidvest
Bank Limited and Eqstra Investment Holdings Motors Proprietary Limited
(“Bidvest/Eqstra”),3 where the Tribunal considered the market for vehicle
leasing and fleet management.
[19] The Commission therefore assessed the effects of the proposed merger in the
following markets: (i) upstream market for the provision of vehicle financing and
(ii) downstream market for the provision of vehicle leasing and fleet
management services.
[20] The merging parties agreed with this approach.
1 Case no: 2011Jun0091.
2 Case no.: 10/LM/Feb04.
3 Case no.: 097/LM/Sep19.
[21] We did not receive evidence to suggest that we should depart from this way of
framing the product markets. While we do not find it necessary to conclude on
the precise scope of the relevant product markets since no competition
concerns arise in the present case whichever approach is taken, we examine
each of the above product markets in our analysis.
Relevant Geographic Market
[22] In its assessment of geographic market, the Commission considered the
Tribunal’s decisions in transactions between Bidvest/Eqstra case4 and Volvo
Financial Services Southern Africa (Pty) Ltd v Volvo Finance Debtors Book
case,5 and assessed the effect of the proposed transaction in the following
markets: (i) the national upstream market for the provision of vehicle financing;
and (ii) the downstream market for the provision of vehicle leasing and fleet
management services. on a national level.
[23] We did not receive evidence to suggest that we should depart from this way of
framing the geographic market. While we do not find it necessary to conclude
on the precise scope of the relevant geographic markets since no competition
concerns arise in the present case whichever approach is taken, we examine
each of the above geographic markets in our analysis.
Market shares
[24] In the market for the provision of vehicle leasing and fleet management,
Nedbank has a market share less than 5% and Eqstra has a market share of
about 10% - 15%. The market share accretion is about 10% - 15%.
[25] Further, the merged entity will continue to face competition from other players
in the market such as WesBank Limited (“Wesbank”), Zeda Car Lesasing (Pty)
4 Ibid.
5 Case no: LM162Mar20.
Ltd t/a Avis Fleet (“Avis Fleet”), Standard Bank Limited (“standard Bank”), Fleet
Africa (Pty) Ltd (“Fleet Africa”), Zenith Car Rental (Pty) Ltd, Bidvest Group
Limited (“Bidvest”), Afirent Fleet Data Technologies (Pty) Ltd (“Afirent Fleet
Data Technologies”), Moipone Fleet Isipho Capital (Pty) Ltd (“Moipone Fleet
Isipho Capital”), Katari Fleet Solutions (Pty) Ltd (“Katari Fleet Solutions”) and
Kwane Capital (Pty) Ltd (“Kwane Capital”).
[26] Based on the above, we do not consider it likely that the merged entity will have
substantial market power.
Vertical assessment
Input foreclosure:
[27] In the upstream market for the provision of vehicle financing, the merged entity
will have a combined market share of less than 20%.
[28] The merged entity will continue to be constrained by competitors such as Absa
Bank Limited (“Absa”), WesBank, and Standard Bank.
[29] We did not receive evidence to suggest that the merged entity will have the
ability to incentive and foreclose downstream rivals.
[30] In light of the above, we are of the view that the proposed merger is unlikely to
raise any significant input foreclosure concerns.
Customer foreclosure
[31] We considered whether the merged entity would have the ability and incentive
to foreclose the other upstream competitors’ access to the Target Business as
a customer of vehicle financing.
[32] The Commission noted that pre-merger, Eqstra procures vehicle financing from
The Commission in its investigation
engaged with , who indicated that they do not have
any concerns with the proposed transaction.
[33] The Commission further noted that Eqstra has an estimated market share of
less than 20% in the downstream market for the provision of fleet management
services and competes with other players active in the market such as
Supergroup, AvisFleet, Fleet Data Technologies, Moipone Fleet Isipho Capital,
Katari Fleet Solutions amongst others.
[34] Furthermore, the Commission considered barriers to entry in the downstream
market for the provision of fleet management services and found that the
barriers to entry in this market are unlikely to be high as there are firms that
have recently entered the market.
[35] Given the above, we conclude that the proposed transaction is unlikely to raise
any customer foreclosure concerns.
Conclusion on the competition assessment
[36] In light of the above, we do not believe that the proposed transaction is like to
raise a substantial lessening of competition
Public Interest
Effect on employment
[37] The merging parties submitted that the proposed transaction will not have any
negative effects on employment.
[38] The Commission contacted the employee representatives of the merger
parties, who confirmed that its employees had no concerns regarding the
proposed merger.
[39] In light of the above, the proposed merger is unlikely to raise employment
concerns.
Effect on ownership
[40] The Commission found that the Acquiring Group currently has an effective
shareholding by Historically Disadvantaged Persons (“HDPs”) of approximately
35.88%.
[41] The Commission’s investigation further found that the Target Businesses have
shareholding of approximately 17.71% held by HDPs.
[42] Accordingly, the proposed transaction will result in a positive increase in the
levels of ownership by HDPs.
Other public interest
[43] The proposed transaction raises no other public interest concerns.
Conclusion on public interest
[44] Considering the above, we do not believe that the proposed transaction raises
public interest concerns.
Conclusion
[45] For the reasons set out above, we approve the proposed transaction without
conditions.
14 May 2024
Prof L Mncube
Presiding Member Date
Adv A Kessery and Prof I Valodia concurring
Signed by:Liberty Mncube
Signed at2024-05-14 12:32:41 +02:00
Reason:Witnessing Liberty Mncube
1.----H,,J.
Tribunal Case Manager: Nomkhosi Mthethwa-Motsa
For the Merging Parties: Dale Adams and Ahmore Burger-Smidt of
Werksmans Inc
For the Commission: Nonhlanhla Msiza and Themba Mahlangu