Brimstone Investment Corporation Ltd v Firefly Investments 306 (Pty) Ltd (LM137Nov19) [2020] ZACT 5 (15 January 2020)
- Citation
- [2020] ZACT 5
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Enver Daniels, Yasmin Carrim, Andiswa Ndoni
- Case number
- LM137Nov19
More details
- Court
- Competition Tribunal
- Panel
- Enver Daniels, Yasmin Carrim, Andiswa Ndoni
- Case number
- LM137Nov19
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction, which moves Brimstone from joint to sole control of Firefly, does not result in any substantial lessening or prevention of competition in any market. Firefly's market share is below 5%, and there are significant competitors in the market. No vertical concerns were identified, and Brimstone's relationship with Life Healthcare does not create incentives for foreclosure. The transaction does not raise any public interest concerns, including employment, as no retrenchments are contemplated and employee representatives raised no objections. Accordingly, the Tribunal unconditionally approved the merger.
Court disposition
Unconditional approval of the merger.
Orders
- The proposed transaction is unconditionally approved.
02
Material facts
Parties
Brimstone Investment Corporation Ltd
Applicant Counsel: A Burger-Smidt & S RhodzeFirefly Investments 306 (Pty) Ltd
Respondent Counsel: A Burger-Smidt & S RhodzeAmounts and remedies
- Firefly Market Share (medical Devices): 5
- Brimstone Post Merger Shareholding in Firefly (%): 80
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed transaction will result in a substantial lessening or prevention of competition in any market.
- 02
Whether the transaction raises any public interest concerns, including employment effects.
Party arguments
- Applicant
- The merging parties argued that the transaction would not adversely affect competition, as there is no horizontal overlap between Brimstone and Firefly. They submitted that Firefly holds less than 5% market share in the supply of medical devices and faces competition from other firms. They further asserted that no adverse employment effects would result from the transaction, with no retrenchments contemplated and employee representatives having raised no concerns.
- Respondent
- The Commission concurred with the merging parties, finding no horizontal or vertical competition concerns. It noted Brimstone's existing minority shareholding and the lack of incentive for foreclosure strategies post-merger. The Commission also confirmed that no public interest concerns, including employment, would arise from the transaction.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition, unless justified on public interest grounds.
- 02
Competition Act, No. 89 of 1998
The assessment of public interest includes consideration of employment effects and whether the transaction will result in job losses.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction, which moves Brimstone from joint to sole control of Firefly, does not result in any substantial lessening or prevention of competition in any market. Firefly's market share is below 5%, and there are significant competitors in the market. No vertical concerns were identified, and Brimstone's relationship with Life Healthcare does not create incentives for foreclosure. The transaction does not raise any public interest concerns, including employment, as no retrenchments are contemplated and employee representatives raised no objections. Accordingly, the Tribunal unconditionally approved the merger.
Obiter and limits
- The Tribunal noted that the transaction only involves an increase in shareholding and is unlikely to result in job duplication.
- No other public interest concerns were raised during the investigation.
Court disposition
Unconditional approval of the merger.
- The proposed transaction is unconditionally approved.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
Competition tribunal
SOUTH
AFRICA
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM137Nov19
In the matter between:
BRIMSTONE
INVESTMENT CORPORATION LTD
Primary Acquiring Firm
And
FIREFLY INVESTMENTS 306 (PTY)
LTD
Primary Target Firm
Panel : Enver Daniels (Presiding Member)
: Yasmin Carrim (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard on: 11 December 2019
Order Issued on: 11 December 2019
Reasons Issued on: 15 January 2020
REASONS
FOR DECISION
Approval
[1] On 11 December 2019, the Tribunal unconditionally approved the large merger transaction whereby Brimstone Investment Corporation Ltd ("Brimstone") intends to acquire sole control of Firefly Investments 306 (Ply) Ltd ("Firefly"). Hereunder we shall collectively refer to Brimstone and Firefly as the 'merging parties'.
[2] Our reasons for approval follow.
Parties to the transaction
Primary Acquiring Firm
[3] Brimstone is an investment holding company with various interests in firms in the health, food, financial services, property and other related sectors.
[4] Brimstone is listed on the Johannesburg Stock Exchange ("JSE") and is not controlled by a single shareholder.
Primary Target Firm
[5] Firefly is special purpose vehicle incorporated for the purposes of holding the entire share capital in Obsidian Health (Pty) Ltd ("Obsidian"). Obsidian is a supplier of healthcare products to the public and private sectors within Sub-Saharan Africa. Its portfolio of products includes capital equipment and medical devices with the key focus areas of cardiology, cardiovascular, theatre, ICU and high care.
[6] Brimstone holds 25% in Firefly.
[7] Firefly a is controlled by Capitalworks Private Equity Partnership ("CWPE"), Brimstone (25%), Shawn Michal Landman, Scientific Investments Partnership ("SIP") and Oakleaf Management Trust. Of relevance is CWPE and SIP's shareholdings as they are the sellers in this transaction.
The proposed transaction
[8] The proposed transaction comprises a move from joint to sole control.
[9] In terms of the Sale of Shares and Claims Agreement, Brimstone intends to acquire sole control of Firefly through the acquisition of 54.93% of Firefly's shares held by CWPE and SIP. Upon implementation of the proposed transaction, Brimstone will hold 80% of the shares in Firefly.
Competition Assessment
[10] The Commission considered the activities of the merging parties and found no horizontal overlap arising from the proposed transaction.
Since Brimstone is moving from joint to sole control, the Commission noted and considered Brimstone's current shareholding in Firefly. For the completeness of its investigation, the Commission notes that Firefly has less than 5% market share access for the supply of medical devices. Furthermore, Firefly has competitors such as Medtronic Africa (Pty) Ltd and Philips SA Health Systems (Pty) Ltd who may exercise competitive constraint.
[11] In addition, the Commission found that the proposed transaction does not result in any vertical relationships that may be a cause for concern. The Commission noted the pre-existing relationship between Brimstone and Life Healthcare Group (Pty) Ltd ("Life
Healthcare"), as Brimstone holds a non-controlling interest in Life Healthcare and supplies it with medical devices. The Commission
was of the view that post merger, Brimstone is unlikely to engage in any foreclosure strategies nor does it have the incentive
to do so.
[12] In view of the above, the Commission concluded that the proposed transaction is not likely to result in any substantial lessening of prevention of competition in any market.
[13] We had no reason to differ with the Commission's findings.
Public interest
[14] The merging parties submitted that the proposed transaction will not have any adverse effect on employment and no retrenchments are contemplated as a result of its implementation. The large merger notice was served on the employee representatives of the merging
parties. The Commission contacted the employee representatives and no concerns were raised.
[15] Since this transaction only contemplates an increase in shareholding, it is unlikely that there will be a duplication of jobs. The Commission was therefore satisfied with the merging parties views that no employment concerns will arise as a result of the proposed transaction.
[16] No other public interest concerns were raised.
Conclusion
[17] The proposed transaction entails a move from joint to sole control and does not result in any substantial lessening or prevention of competition in any market. In addition, the proposed transaction will not result in any job losses and does not raise any other public interest concern.
[18] We therefore unconditionally approved the proposed transaction.
_____
Mr Enver Daniels
15 January 2020
Date
Ms Yasmin Carrim and Ms Andiswa Ndoni concurring.
Tribunal Case Manager : Ndumiso Ndlovu
For the Merging Parties : A Burger-Smidt & S Rhodze of Werksmans Attorneys
For the Commission : N Msiza and M Aphane
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