FBC Nominees No1 (Pty) Ltd & Another and SA Airlink (Pty) Ltd (47/LM/May07) [2007] ZACT 46 (17 July 2007)
- Citation
- [2007] ZACT 46
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 47/LM/May07
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 47/LM/May07
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger between FBC Nominees No1 (Pty) Ltd, Coronation Capital (Pty) Ltd, and SA Airlink (Pty) Ltd arose from a debt restructuring exercise, resulting in Nedbank and Coronation each acquiring 33.5% shareholding in SA Airlink. The acquiring firms do not compete with SA Airlink, and their aircraft leasing arrangements are part of their ordinary financing business. The transaction does not create any horizontal or vertical overlaps that would raise competition concerns. The Tribunal further noted that no significant public interest issues, such as retrenchments or adverse effects on particular industries, were identified. The acquisition results in negative control as defined in section 12(2)(g) of the Competition Act. Accordingly, the Tribunal approved the merger as it is unlikely to substantially prevent or lessen competition or negatively affect the public interest.
Court disposition
Merger approved without conditions.
Orders
- The merger between FBC Nominees No1 (Pty) Ltd, Coronation Capital (Pty) Ltd, and SA Airlink (Pty) Ltd is approved.
- No conditions are imposed on the approval.
02
Material facts
Parties
FBC Nominees No1 (Pty) Ltd
Applicant Counsel: Natalie BrowneCoronation Capital (Pty) Ltd
Applicant Counsel: Natalie BrowneSA Airlink (Pty) Ltd
RespondentAmounts and remedies
- Nedbank Post Transaction Shareholding (%): 33.5
- Coronation Capital Post Transaction Shareholding (%): 33.5
- RA Foster Post Transaction Shareholding (%): 23
- BJ Webb Post Transaction Shareholding (%): 10
03
Procedural history
Posture
Merger Application / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger will substantially prevent or lessen competition in any relevant market.
- 02
Whether the transaction raises any significant public interest concerns under the Competition Act.
- 03
Whether the acquisition results in negative control as contemplated in section 12(2)(g) of the Act.
Party arguments
- Applicant
- The merging parties argued that the transaction is a debt restructuring exercise resulting in Nedbank and Coronation each acquiring 33.5% shareholding in SA Airlink. They contended that there is no overlap in the activities of the merging parties, as Nedbank is a registered bank and Coronation is involved in investment banking, and that their aircraft leasing arrangements with SA Airlink are made in the ordinary course of business. The transaction is expected to strengthen SA Airlink's balance sheet and facilitate organic growth. No retrenchments or adverse public interest effects are anticipated.
- Respondent
- The Competition Commission did not oppose the merger. It found that the transaction would not substantially prevent or lessen competition in any market, as the acquiring firms do not operate in the same market as SA Airlink. The Commission also noted the absence of significant public interest concerns and confirmed that the acquisition would result in negative control as defined in section 12(2)(g) of the Competition Act.
05
Court’s reasoning
Legal principles
- 01
Competition Act, section 12A
A merger will only be prohibited if it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, section 12(2)(g)
Negative control arises where a party acquires the ability to block special resolutions, as contemplated in section 12(2)(g) of the Act.
- 03
Competition Act, section 12A(3)
Public interest considerations include employment effects and impact on particular industries or regions.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between FBC Nominees No1 (Pty) Ltd, Coronation Capital (Pty) Ltd, and SA Airlink (Pty) Ltd arose from a debt restructuring exercise, resulting in Nedbank and Coronation each acquiring 33.5% shareholding in SA Airlink. The acquiring firms do not compete with SA Airlink, and their aircraft leasing arrangements are part of their ordinary financing business. The transaction does not create any horizontal or vertical overlaps that would raise competition concerns. The Tribunal further noted that no significant public interest issues, such as retrenchments or adverse effects on particular industries, were identified. The acquisition results in negative control as defined in section 12(2)(g) of the Competition Act. Accordingly, the Tribunal approved the merger as it is unlikely to substantially prevent or lessen competition or negatively affect the public interest.
Obiter and limits
- The Tribunal observed that the recapitalization would strengthen SA Airlink's balance sheet and support its organic growth.
- The Tribunal noted that, depending on South African Airways' exercise of its call option, the post-transaction shareholding may vary but does not affect the competition assessment.
Court disposition
Merger approved without conditions.
- The merger between FBC Nominees No1 (Pty) Ltd, Coronation Capital (Pty) Ltd, and SA Airlink (Pty) Ltd is approved.
- No conditions are imposed on the approval.
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 OF SOUTH AFRICA
Case No: 47/LM/May07
In the matter between:
FBC Nominees No1 (Pty) Ltd Acquiring Firm
Coronation Capital (Pty) Ltd
And
SA Airlink (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member), N Manoim (Tribunal
Member) and Y Carrim (Tribunal Member)
Heard on : 12 June 2007
Order issued on : 12 June 2007
Reasons issued on : 17 July 2007
Reasons for Decision
Approval
On 12 June 2007, the Tribunal approved the merger between FBC Nominees No 1 (Pty) Ltd, Coronation Capital (Pty) Ltd and SA Airlink(Pty) Ltd. The reasons follow below.
The Transaction
The primary acquiring firms is FBCF Nominees No 1 (Pty) Ltd (âFBCFâ) and Coronation Capital (Pty) Ltd (âCoronationâ). FBCF is a wholly owned subsidiary of Nedbank Group Limited (âNedbankâ), which is ultimately controlled by Old Mutual plc. Coronation is a wholly owned subsidiary of Coronation Investments and Trading Limited, an unlisted public company with various subsidiaries.
The primary target firm is SA Airlink (Pty) Ltd (âSA Airlinkâ). Its shareholders are:
Osprey Airline Investments (Pty) Ltd 45.90%
Roger Arnold Foster 19.35%
Barrie James Webb 19.35%
South African Airways (Pty) Ltd 10%
Osprey Airline Holdings (Pty) Ltd 5.40%
The proposed transaction arises out of a debt restructuring exercise which will result in each of Nedbank and Coronation subscribing for 33.5% shareholding in SA Airlink. SA Airlink is a client of both Nedbank and Coronation Capital which has, due to the negative effect that the events of 11 September 2001 has had on the aviation industry, received temporary financial assistance from them. Nedbank and Coronation will each acquire shares in SA Airlink in order to settle the amounts owed to them and will as a result of this settlement acquire negative control over SA Airlink as contemplated in section 12(2)(g) of the Act.
Post the transaction the shareholding in SA Airlink is likely to be:1
Nedbank Ltd (through FBCF) 33.5%
Coronation Capital 33.5%
RA Foster 23%
BJ Webb 10%
The merging parties believe that the proposed transaction should strengthen SA Airlinkâs balance sheet and assist it to grow
organically.
The relevant market and the impact on competition
SA Airlink provides scheduled air services linking smaller communities to the major hubs in South Africa and the SADC region. FBCF has previously not traded, Nedbank is a registered bank and Coronation is involved in investment banking. Although there is no overlap in the activities of the merging parties both Nedbank and Coronation leases, in terms operating lease agreements, certain aircraft to SA Airlink. However these arrangements are made in the ordinary course of their business of financing.
The proposed transaction is therefore unlikely to substantially prevent or lessen competition in any market.
Public interest issues
There are no significant public interest issues and no retrenchments are envisaged as a result of the proposed transaction.
____ 17 July 2007
D Lewis Date
N Manoim and Y Carrim concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: Natalie Browne (Cliffe Dekker)
For the Commission: Makgale Mohlala and Marlon Dasarath
1 In the event that South African Airways does not accept that the call option for its 10% shareholding pre the transaction has been validly exercised and it does not follow its rights in terms of the proposed recapitalization, the parties anticipate that the likely shareholding post the recapitalization will be: Nedbank 32.6% Coronation 32.6% RA Foster 22.33% BJ Webb 9.73% SAA 2.74%
1 In the event that South African Airways does not accept that the call option for its 10% shareholding pre the transaction has been validly exercised and it does not follow its rights in terms of the proposed recapitalization, the parties anticipate that the likely shareholding post the recapitalization will be:
Nedbank 32.6%
Coronation 32.6%
RA Foster 22.33%
BJ Webb 9.73%
SAA 2.74%
3
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