Rationale for the transaction
5. The parties pointed out that Rentmeester had received a notice from the Registrar of Long-Term Insurance acting through the Financial
Services Board (“FSB”) raising concerns about the financial soundness of the business and requiring them to take steps
to rectify the situation. Sale of the business was considered the best option and CAL which has had a policy of acquiring other insurance
businesses had made the most attractive offer.
Activities of the merging parties
6. CAL is a registered long-term insurer which provides both individual insurance policies and group insurance products. The former category
includes products such as life, disability, health and investment benefits whilst the latter category includes products such as pension,
provident and retirement funds. CAL also owns various property holding and investment holding companies. It owns six office properties
situated in Johannesburg and Witbank.
7. Rentmeester too is a long-term insurer which provides individual and group insurance policies similar to those of CAL. It also provide - through
its subsidiaries – funeral undertaking services (mainly in Pretoria) and the development of underdeveloped residential properties in Hazyview, Mpumalanga. Rentmeester also has a property management services division, which acts as letting agent of properties,
situated in Pretoria, Centurion, Port Elizabeth, Pietersburg and Johannesburg. Rentmeester further owns 2 office and retail properties
situated in Pretoria.
The relevant market
8. As articulated above, both parties are registered long-term insurance companies, which provide both individual and group life insurance
policies. They also own a number of office properties in various geographic areas. It is implicit, therefore, that an overlap exists
in the activities of the merging parties with respect to the provision of office properties and group and individual insurance policies.
9. The Commission expressed that from a policyholder or customer perspective, both individual and group covers (which fall under long-term
insurance and regulated in terms of the Long-Term Insurance Act) are not interchangeable. The parties asserted that, from a supply
side, providers of individual and group policies could potentially enter each other’s market segments without incurring substantial
costs. In this regard, the long-term insurance licence issued to the long-term insurer by the FSB does not restrict the insurer as to which
kind of cover it could provide. The insurer concerned is therefore free to choose whether it wishes to focus on individual or life
policies or both. The Commission contended that - from a supply side substitution perspective - an insurer who renders individual
cover could also render group cover and vice versa. The Commission, therefore, adopted a broader market definition as the market
for the provision of long-term insurance.
10. We need not confine ourselves with what the relevant product market is as the transaction is unlikely to prevent or lessen competition
substantially irrespective of any market definition adopted.
Geographic market
11. As alluded to above, CAL has 6 office properties situated in JHB and Witbank whilst Rentmeester owns 2 office properties based
in Pretoria. The Commission viewed the geographic market as national because the tenants look into their local area when they need
to rent a property. It further contended that no geographic overlap exists as CAL does not have office properties in Pretoria.
12. As is evident from the above, the merging parties provide long-term insurance throughout South Africa, and the geographic domain
is therefore national.
Effect on competition
13. We were advised at the hearing that the merging parties would have a combined post-merger market share of about 4% in the category
of group life insurance, and only less than 3% in the individual life category. In all cases the merging parties’ combined post-merger market shares appears to be relatively low, and do not give a cause
for concern. Furthermore, no geographic overlap exists between the parties with respect to the provision of office properties.
Public Interest Concerns
14. The merger filing reflected that CAL has a staff complement of 780 (i.e., 530 permanent and 250 sales consultants) at the moment.
The current staff complement of Rentmeester is 200 employees. Therefore the total number of the employees post-merger will be 980.
The parties were uncertain as to the exact number of employees to be retrenched pursuant to the proposed merger. The parties submitted
that given the duplication in the support and/or back office function, if any retrenchments are to be effected, the worst-case scenario
is that it will only affect an absolute maximum of 40 employees out of possible 980 employees. The Commission contended that this
only constitutes 4% of the entire work force of the merged entity.
15. On the other hand, the parties submitted that Rentmeester is failing, and in the event that it is placed under curatorship, all
200 employees might face retrenchment. The merging parties confirmed that CAL would make all efforts to minimise the number of affected
employees (this usually would occur by way of natural attrition of employees and/or by way of internal transfers within CAL.
16. Considering that the target firm is placed under curatorship, all 200 employees will lose their jobs and the fact that only 40
out of 980 will lose their job on a worse case scenario, the Commission submitted that the merger does not raise significant public
interest concerns which can justify a conditional approval or prohibition of the merger.
17. The Commission did not receive any submissions from employees opposing the merger.
18. For the above reasons, we concur with the Commission that the transaction be unconditionally approved.
_______________ 18 March 2005
Norman Manoim Date
Concurring: Yasmin Carrim and Merle Holden
For the merging parties:
Ilse Gaigher (Jowell Glyn & Marais Attorneys)
For the Commission:
Magale Mohlala & Edwell Mtantato (Mergers & Acquisitions)
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