The Parties
The primary acquiring firm is JP Morgan Securities South Africa (Pty) Ltd (“JP Morgan Securities”), a wholly owned subsidiary
of JP Morgan International Finance Ltd, which in turn is wholly owned by JP Morgan Chase and Co (“JPMC”). JPMC is a public
company listed on the New York Stock Exchange, the London Stock Exchange and the Tokyo Stock Exchange. JPMC has several subsidiaries
worldwide. In South Africa, JPMC has control over the following entities: JP Morgan Securities, the Johannesburg branch office of
JP Morgan Chase Bank; JP Morgan Equities Limited, Sharestock Nominees (Pty) Ltd and Tasc Administration (Pty) Ltd.
The primary target firm is Cazenove South Africa (Pty) Ltd (“Cazenove SA”), which at the time of notification, was one
of seven wholly owned subsidiaries of Cazenove International Holdings Limited (“Cazenove International”). Cazenove International
is wholly owned by Cazenove and Co Limited, which in turn is owned by the Cazenove Group Plc. The parties however, informed the Tribunal
that as part of an internal restructuring, the shares of Cazenove SA had been transferred from Cazenove International to Cazenove
& Co.
The Transaction
JP Morgan Securities is acquiring the entire share capital of Cazenove SA. The transaction is prompted by an international transaction
in which Cazenove Group Plc and JP Morgan form a UK-based partnership to be called JP Morgan Cazenove. The transaction will combine Cazenove’s investment banking business with JP Morgan’s United Kingdom-based investment
banking business in a jointly owned company. According to the parties the South African transaction is separate from the international transaction and the South African operations
of the parties will not form part of the international joint venture referred to above.
Rationale for the Transaction
According to the parties, the joint venture will provide Cazenove’s clients with access to JP Morgan’s global network,
capital strength and broad capabilities, while still preserving Cazenove’s operational independence The parties hope to increase
their market share since the transaction will enable them to compliment each other through some of their business activities.
The Parties’ Activities
Worldwide, the activities of JPMC are internally organized into six major business segments viz. asset and wealth management, card
services, commercial banking, investment banking, retail financial services and treasury and securities services. JPMC’s activities
in South Africa are conducted through its subsidiaries listed below:
♣
JP Morgan Securities trades primarily in non-government fixed income securities and also markets structured products to its client
base, and earns fees on corporate debt origination and securitisation in South Africa.
♣
The Jhb branch of JP Morgan trades in foreign exchange and capital markets in South Africa. It also offers structured products and
advisory service to its client base and has a full banking licence.
♣
JP Morgan Equities is engaged in equities broking and trading.
♣
Tasc Administration provides a comprehensive portfolio administration and investment accounting service for local and foreign investments.
Additional services include performance management and composite measurement, securities lending, tax services and reporting.
♣
Sharestock Nominees holds various investments as a nominee company. Income on these investments is credited directly to the beneficial
shareholders.
Worldwide, the Cazenove group is involved in investment banking and operates primarily in the United Kingdom. The group’s activities
include corporate finance, capital markets, equities and fund management. Cazenove SA offers a comprehensive range of financial advice
and services including corporate finance and equities research, sales and trading. Ancillary to these services, Cazenove SA also
conducts corporate broking activities, including shareholder analysis and sponsorship activities.
Impact on competition
The Commission analysed the transaction on both a broad market for corporate, investment and merchant banking and on the narrower
markets for corporate finance services and equities research, sales and trading services. The corporate finance market includes mergers
and acquisitions advisory services and debt and equity capital markets services. With regard to the geographic market, the parties
submit that the relevant services are offered globally. The Commission however, used the national market for its analysis.
The table below shows the parties’ 2003 market shares in the corporate finance market:
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