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Clidet 526 (Pty) Ltd and Pamodzi Investment Holdings (Pty) Ltd (10/LM/Mar05) [2005] ZACT 35 (31 May 2005)

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COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 10/LM/Mar05

In the large merger between:

Clidet 526 (Pty) Ltd Primary Acquiring Firm

and

Pamodzi Investment Holdings (Pty) Ltd Primary Target Firm


 REASONS FOR DECISION


Approval

[1] The Competition Tribunal issued a Merger Clearance Certificate on 23 March 2005 approving the proposed merger between the abovementioned parties in terms of section 16(2)(a). The reasons for the approval of the merger appear below.

The Parties

[2] The primary acquiring firm is Clidet No. 526 (Pty) Ltd (“Clidet”), a special purpose vehicle whose shareholders are RMB Ventures (Pty) Ltd (“RMB Ventures”) and certain executives (“the executives”) of Pamodzi Investment Holdings (Pty) Ltd (“PIH”). RMB Ventures and the executives hold 40% and 60% of Clidet respectively.

[3] The primary target firm is PIH, an investment holding company focussing on telecommunications, information technology, financial services, food and related industries. PIH controls Alacrity Financial Services Ltd (“Alacrity”) and FoodCorp Holdings (Pty) Ltd (“Foodcorp Holdings”).

The transaction

[4] The proposed transaction entails the acquisition of PIH by RMB Ventures and certain executives of PIH (through Clidet, a special purpose vehicle). The investment acquired in PIH consists of the shares and claims in PIH and one ordinary share in the share capital of Shady Grove Investments (Pty) Ltd (“Shady Grove”), a vehicle
through which the Pambi Trust holds its shares in PIH. Post-merger, Clidet and Pambi Trust will own 31% and 8% respectively in PIH whilst 69% would remain in the hands of a vast array of individuals.

[5] The merging parties consider this deal as a greater opportunity for black economic empowerment, because the beneficiaries of the Pambi Trust, who are a broad based historically disadvantaged persons (“HDP’s”) (group of 57 individuals), would remain with fully paid shares in PIH, thus consolidating the control of HDP’s in PIH.

Activities of the parties

[6] Clidet has been created mainly for this acquisition. Alacrity is involved in the brokerage of short-term insurance products. FirstLink is an insurance company which specialises in the brokerage of short-term insurance products. PIH is an investment holding company with interests in a variety of sectors. Foodcorp is active in the production, marketing and distribution of foods.

Competition Evaluation

[7] The merger does not give rise to any competition concerns. The relevant companies for our analysis are Alacrity and FirstLink. Alacrity and FirstLink are involved in the brokerage of short-term insurance products throughout South Africa. The market share figures provided to us by the merging parties revealed that Alacrity and FirstLink enjoy less than 3% and 5% respectively in the short-term insurance brokering market. Post-merger, they will enjoy market shares not in excess of 8%, a - relatively small share. There appear to be a number of major competitors with substantial market shares in the relevant market such as Alexander Forbes (22%), Glenrand MIB (14%), ABSA Brokers (6%) and Standard Bank Insurance Brokers (8%). The merger appears not to raise any vertical integrated concerns whatsoever.

[8] The transaction did not raise any public interest concerns. In addition, no job losses were anticipated post-merger.

Conclusion

[9] In the Tribunal’s view, the transaction will not prevent or lessen competition substantially.



_____________ 31 May 2005
Yasmin Carrim Date
Concurring: David Lewis and Norman Manoim

For the merging parties:         Adv. Horace Shozi instructed by Mahlangu Nkomo Mabandla Ratshimbilani Attorneys.

For the Commission:      Hardin Ratshisusu (Mergers & Acquisitions Division)

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