The Primary Target Firm
13. FIH was formed in 1997 to steer the commercial affairs of the Fabcos Trust. It was incorporated in 1995 as a special purpose vehicle specifically
formed for purposes of acquiring shares and obtaining ownership stakes in corporate entities for the benefit and on behalf of the
Fabcos members. The parties indicated that it was intended, after the establishment of Fabvest in 1997, that FIH would be ring-fenced
to hold only the Fabcos Trust’s casino interests. As alluded to above, FIH will, pursuant to this transaction, transfer all
interests in its portfolio firms, save for its 38% share in TIH, to Fabvest. Therefore post-transaction, FIH’s only interest
will be a 38% stake in TIH, whilst Fabvest will assume control of those portfolio firms currently controlled by FIH.
14. TIH is described as a a broad based black economic empowerment entity whose shareholding benefits organized black owned businesses, labour movements and
women groups. TIH has a joint venture company, Tsogo Sun with the SAB Miller. Both TIH and SAB Miller own a 51% and 49% shares in
Tsogo Sun respectively.
15. Tsogo Sun Gaming is a casino operating entity, which owns 5 casino licenses operating in various geographic areas as described elsewhere in this report.
The relevant product market
16. It is clear from the above that the only product overlap between the parties
relates to their respective interests in the gaming industry (provision of casino in particular).
The relevant geographic market
17. It can be seen from the above that Kwazulu-Natal (Durban) seems to be the only region where the parties have interest in casino
operation, i.e., in their joint venture, Suncoast Coast Casino & Entertainment World. According to the Commission, the geographic
overlap between the merging parties is in the Kwazulu-Natal area.
Market shares
18. Below is a table (provided by the parties) reflecting the market share data relating to the gaming industry at regional and national
level.
| Province |
Estimated Market Share |
|
Sun International |
Tsogo Sun |
Global Resorts |
Gold Reef |
Others |
| Gauteng |
18 % |
31 % |
29 % |
20 % |
2 % |
| Western Cape |
85 % |
- |
- |
5 % |
10 % |
| Kwazulu-Natal |
30 % |
55% |
- |
10 % |
5 % |
| Eastern Cape |
70 % |
30 % |
- |
- |
- |
| Northwest Province |
95 % |
- |
- |
- |
5 % |
| Mpumalanga |
- |
80 % |
20 % |
- |
- |
| Free State |
100 % |
- |
- |
- |
- |
| Northern Province |
75 % |
- |
- |
- |
25 % |
| Northern Cape |
75 % |
- |
- |
- |
25 % |
| Total SA Market |
40 % |
25 % |
15 % |
10 % |
10 % |
Competition evaluation
19. The parties contended that Johnnic Holdings is not considered a significant “player” in any region within the gaming
industry. The only geographic area affected is Kwazulu-Natal where the merging parties are involved via indirect non-controlling
equity investments in various entities in the gaming industry. On the other hand, the Commission contended that the proposed transaction would not result in any change in the current market structure.
20. We were told that entry into the gaming industry is regulated through the national Gambling Act 33 of 1996, which provides for
the granting of a maximum of 40 licences, distributed across each of the 9 new provinces. The parties further informed us that there
are 30 casinos operating and 10 outstanding licences currently. Of the 30 existing casinos, Tsogo Sun operates 5 casinos. The competitors
of Tsogo Sun (55%) are Sun International with 30%; Gold Reef (10%); and Others (5%). The merging parties contended that the proposed transaction does not in any way increase the barriers to entry, as these regulatory
requirements exist irrespective of the proposed merger. It is further contended that both Johnnic and FIH have limited interests
in the gaming industry. The parties further intimated that the merger would enable a relatively new player such as Johnnic to increase
its presence in the gaming sector, and the transaction was therefore pro-competitive.
21. We were satisfied with the merging parties’ and the Commission’s submissions, hence we are of the view that the transaction
is unlikely to prevent or lessen competition substantially.
Conclusion
22. The merger raises no public interest concerns militating against the approval of the transaction. Accordingly, the merger is approved
unconditionally.
_______________ 18 March 2005
Norman Manoim Date
Concurring: Yasmin Carrim and Merle Holden
For Johnnic :
Jocelyn Katz & Meluleki Nzimande (Webber Wentzel Bowens)
For Fabcos :
Werner Behrens (Lowndes & Associates)
For the Commission:
Makgale Mohlala (Mergers & Acquisitions)
.RTF of original document