The merger transaction
The primary acquiring firms are Investec Group Ltd, Newinvest 80 (Pty) Ltd, Yellowfield Investments (Pty) Ltd and Frame Investment
Holdings Ltd.
Investec is controlled by Investec Holdings, a public listed company on the JSE. Newinvest is controlled by JGM nominees (Pty) Ltd.
Yellowinvest is a wholly owned subsidiary of Republic Nominees (Pty) Ltd and Frame Holdings is controlled by Fynne Holdings Ltd,
also a nominee company. Both Yellowinvest and Frame Holdings are shelf companies, which have not traded before.
Yellowfields, Frame Investments and Investec represent three substantial interests in the merged company, that of David Sable as to
37,5%, David Bowles as to 37,5%, Investec as to 10% and management as to the balance of the shares.
The primary target firm is the Frame Group Ltd, a company listed on the JSE. Seargreg Investments (Pty) Ltd, which is 50% owned by
Seardel and 50% owned by Frame chairman Roy Sable, has a 46,9% shareholding in Frame. There are approximately thirty companies in
the Frame Group, some active and some dormant.
The merger consists of three transactions, namely, a restructure, a sale and a scheme of arrangement.
•
Frame will be restructured to become a holding company with Consolidated Textiles as its “first level” subsidiary. All the other first level subsidiaries
of Frame will become “second level” subsidiaries and will be controlled by Consolidated Textiles.
•
In terms of the sale agreement, Newinvest will acquire all the shares in Consolidated Textiles. Yellowfields holds 40%, Frame Investment Holdings 50%
and Investec 10% of the shares in Newinvest.
In terms of the merger agreement, Investec, on 24 August 2000, proposed a scheme of arrangement between Frame and its shareholders in terms of section 311 of the Companies Act to acquire all the shares in Frame from its shareholders.
Evaluating the merger
The relevant product market
Frame derives its income through investments and its trading subsidiaries derive their income through the manufacture and sale of
textiles, as well as the rental of commercial and industrial properties. The Frame Group is involved in the textile industry through
Frame Spinning Mills, Frame Woven Fabrics, Frame Knitting Manufacturers, Frame Manchester Manufacturers Frame Fibres, Romatex Ltd
and Confram Property Holdings Ltd.
Investec is a specialist bank, which provides banking services, such as investment banking and principal transaction, corporate banking
and interest rate activities, private client group and asset management.
Effect on competition
None of the principals in the Investec Consortium have any interest in the clothing industry except the Sable family, which owns Gregory
Knitting Mills (Pty) Ltd, a small privately owned company with a turnover of a tenth of that of Frame. Although it is not quite clear
what influence Gregory Knitting Mills has had in the past it would appear that it is not a significant player in the market in relation
to the size of a company such as Frame.
There is no product overlap between the parties except possible in the area of asset management, which may include property management.
However, this overlap is negligible.
Public interest considerations
The transaction is a sale of shares and will not have any affect on employment or any of the other public interest issues referred
to in section 16 of the Act.
D.H. Lewis
Date
Concurring: N.M. Manoim, P.E. Maponya
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