In the matter between:
The Competition Commission
Applicant
and
The Tiso Consortium
First Respondent
New Africa Investments Limited Second Respondent
Investec Bank Limited Third Respondent
Safika Holdings (Pty) Ltd Fourth Respondent
Capricorn Capital Partners Holding Fifth Respondent
Company (Pty) Ltd
Multidirect Investments 180 (Pty) Ltd Sixth Respondent
Mineworkers Investment Company (Pty) Ltd Seventh Respondent
________________________________________________________________
REASONS
________________________________________________________________
1. In this case we have agreed to make a settlement agreement between the Competition Commission and the respondents, a consent order
in terms of section 49 D of the Act. The material terms of the order are that the members of the Tiso Consortium, agree jointly and
severally to pay an administrative fine of R 500 000,00 (Five hundred thousand rand) for implementing a merger without the prior
approval of the Competition Tribunal in contravention of section 13A (3) of the Act.
2. Although it is not our normal practice to provide reasons for approving a consent order, in this case, we have decided to do so.
3. This application for a consent order arises from a contest for the control of New Africa Investments Limited (Nail) in 2003. Two
rival consortia, the Tiso Consortium (“Tiso”) and the Kagiso Consortium (“Kagiso”) had made rival bids to
Nail shareholders for their shares. The bids were structured differently. One significant distinction was that the Kagiso bid was
conditional on Competition Act (the “Act”) approval, whilst the Tiso bid was not.
4. Tiso exploited this distinction as a selling point to Nail shareholders in motivating acceptance of its offer ahead of Kagiso’s.
In its circular to shareholders making the offer, Tiso inter alia argued that –
“The Tiso Consortium’s offer has been structured in as simple a manner possible to allow Nail shareholders the maximum degree
of certainty when accepting the offer- …
-
by eliminating the need to wait until the end of an uncertain
regulatory process”
5. Tiso succeeded in securing the shares and subsequently control of Nail. The transaction was subsequently notified as a merger after
the Commission, in an application for an interdict (the “interdict application”) that was previously before us, had expressed
the view that the merger was indeed notifiable. The Commission, in the interdict application, argued that the Tiso consortium had
acquired control of Nail, inter alia, in terms of section 12(2)(a). The merger was subsequently notified to the Tribunal and was
approved subject to conditions.
6. It seems common cause that the failure to notify was not motivated by a desire to avoid regulatory scrutiny because the merger
might fall foul of the Act. Rather, the motivation for not notifying appears to have been animated by the desire to present a more
attractive ‘risk free’ bid to shareholders.
7. The crisp issue that the Commission had to determine in its investigation was whether Tiso genuinely believed that its scheme complied
with the law and that it was not obliged to notify, even though the Commission considers this view of the law erroneous.
8. We were advised at the hearing that the Commission has accepted that the Tiso Consortium had in good faith not notified, because,
on account of the complex Nail share structure, it did not believe it had crossed a ‘bright line’ in the Act for presuming
a change of control. The Commission conceded that it had not investigated further whether this view was held by Tiso at the relevant time, but had accepted
the views of the parties’ legal advisors that they genuinely believed this transaction not to be notifiable.
9. We have no reason to second guess the Commission on these facts and accept that if the parties were bona fide, the fine is appropriate.
10. Nevertheless we have some words of caution and hence our decision to give reasons for our order.
11. In our view, if the motivation for not notifying had not been bona fide, then the fine of R 500 000 would be inadequate, by an
order of magnitude. It would be sad day indeed for our legal system that if in the race to reach a destination first, the party that
that had no scruples about jumping a red light on the way, always won against the party that obeyed the law and stopped while waiting
for the green. An appropriate sanction in these circumstances should ensure that the fine for jumping the light significantly diminishes
the spoils of the prize.
12. The Commission should in future, in situations where there may be grounds for parties to have a motive not to notify, investigate
the case further, and not merely accept the merging parties say so.
13. Transacting parties in the situation of Tiso, should endeavour to engage the Commission before the fact, and not after, in situations
where the obligation to notify is not clear. We have some sympathy with Tiso’s contention that time is of the essence when structuring rival bids, but perhaps the Commission
needs to assure parties that it can grant expedited advice when the circumstances justify it.
14. Our comments are made not to cast possible doubt on the merging parties bona fides - there is no evidence before us to suggest
that their contentions should not be accepted. Rather we see the occasion as a useful opportunity to give guidance to the Commission
and merging parties placed in a similar situation in future.
______________
21 October 2004
Norman Manoim
Date
Concurring: David Lewis and Mbuyiseli Madlanga
For the Commission:
Mark Worsley (Legal Services Division)
For NAIL:
Lee Mendelsohn & Justin Balkin (Edward Nathan & Friedland Corporate Law Advisers)
For the Tiso Consortium: Zoe Banchetti & Safeera Mayet (Tugendhaft Wapnick Banchetti & Partners)
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