GroCapital Holdings (Pty) Ltd v South African Bank of Athens Ltd (LM065May18) [2018] ZACT 77 (21 September 2018)
- Citation
- [2018] ZACT 77
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- LM065May18
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- LM065May18
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction, with the inclusion of PIC as a shareholder, did not raise new competition concerns beyond those previously assessed. The only material change was the addition of PIC, which could potentially facilitate information exchange and coordinated effects among competing banks. The merging parties undertook that PIC would not appoint any person to the boards of GroCapital or SABA who was, or had recently been, a director of a competing bank, and would implement confidentiality measures to prevent the exchange of sensitive information. The Tribunal was satisfied that these conditions adequately addressed the risks. No public interest concerns, including employment impact, were identified. The merger was approved subject to the agreed conditions.
Court disposition
Merger conditionally approved subject to the conditions set out in Annexure A.
Orders
- The proposed merger between GroCapital Holdings (Pty) Ltd and South African Bank of Athens Ltd is approved subject to the conditions attached as Annexure A.
- PIC shall not appoint any person to the board of GroCapital or SABA who is, or has been in the preceding six months, a member of the board of a competing banking service provider.
- PIC shall ensure measures are in place to prevent the exchange of sensitive information, including confidentiality undertakings by representatives on the GroCapital and SABA boards.
02
Material facts
Parties
GroCapital Holdings (Pty) Ltd
Applicant Counsel: Andries Le GrangeSouth African Bank of Athens Ltd
Respondent03
Procedural history
Posture
Merger Application / Approval With Conditions
04
Questions and positions
Legal issues
- 01
Whether the proposed merger would substantially prevent or lessen competition in any relevant market.
- 02
Whether the inclusion of PIC as a shareholder raises coordinated effects or information exchange concerns among competing banks.
- 03
Whether the transaction raises any public interest concerns, including employment impact.
Party arguments
- Applicant
- GroCapital and its shareholders argued that the transaction would allow AFGRI to expand its financial services offering by acquiring an entity with a banking licence. The PIC sought to maximise returns on investment in a new banking entity. The merging parties submitted that the transaction would not result in any job losses and would not negatively impact employment or other public interest factors.
- Respondent
- The South African Bank of Athens, owned by the National Bank of Greece, submitted that the disposal was necessitated by Greece's financial situation, which constrained capital conditions and reduced growth. The Commission raised concerns about the PIC's interests in various banking service providers, which could facilitate information exchange and collusion, but accepted the parties' undertakings to prevent such risks.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger may not be approved if it is likely to substantially prevent or lessen competition unless conditions are imposed to address such concerns.
- 02
LM007Jun17, Para 12
Where a shareholder holds interests in competing firms, measures must be taken to prevent the sharing of sensitive information and cross-directorships that could facilitate collusion.
- 03
Competition Act, 89 of 1998
Public interest considerations, including employment impact, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction, with the inclusion of PIC as a shareholder, did not raise new competition concerns beyond those previously assessed. The only material change was the addition of PIC, which could potentially facilitate information exchange and coordinated effects among competing banks. The merging parties undertook that PIC would not appoint any person to the boards of GroCapital or SABA who was, or had recently been, a director of a competing bank, and would implement confidentiality measures to prevent the exchange of sensitive information. The Tribunal was satisfied that these conditions adequately addressed the risks. No public interest concerns, including employment impact, were identified. The merger was approved subject to the agreed conditions.
Obiter and limits
- The Tribunal noted that the restructuring and re-notification of the transaction was prompted by regulatory advice from the South African Reserve Bank, not by competition concerns.
- The Tribunal emphasised the importance of confidentiality undertakings and board appointment restrictions in mitigating coordinated effects in the banking sector.
- No concerns were raised by employee representatives, and the Commission was satisfied that employment would not be negatively affected.
Court disposition
Merger conditionally approved subject to the conditions set out in Annexure A.
- The proposed merger between GroCapital Holdings (Pty) Ltd and South African Bank of Athens Ltd is approved subject to the conditions attached as Annexure A.
- PIC shall not appoint any person to the board of GroCapital or SABA who is, or has been in the preceding six months, a member of the board of a competing banking service provider.
- PIC shall ensure measures are in place to prevent the exchange of sensitive information, including confidentiality undertakings by representatives on the GroCapital and SABA boards.
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: LM065May18
In the matter between
GroCapital Holdings (Pty) Ltd
Primary Acquiring Firm
And
South African Bank of Athens Ltd
Primary Target Firm
Panel
: Mr Norman Manoim (Presiding Member)
: Mrs Medi Mokuena (Tribunal Member)
: Ms Andiswa Ndoni (Tribunal Member)
Heard on : 12 September 2018
Order Issued on : 12 September 2018 Reasons Issued on : 21 September 2018
REASONS
FOR DECISION
Approval
[1] On 12 September 2018, the Competition Tribunal ("the Tribunal") conditionally approved the large merger between GroCapital Holdings (Pty) Ltd ("GroCapital")and South African Bank of Athens Limited ("SABA").
[2] The reasons for the approval follow.
Parties to the transaction and their activities
Primary acquiring firm
[3] GroCapital is jointly owned and controlled by: AFGRI Holdings (Pty) Ltd ("AFGRI"), Fairfax Africa Investment (Pty) Ltd ("Fairfax Africa") and The Public Investment Corporation (SOC) Ltd ("PIC"). AFGRI and Fairfax Africa are both ultimately owned by Fairfax Financial Holdings Ltd, a public Canadian investment company.
[4] GroCapital provides financial services to businesses involved in the agricultural value chain and is one of a number agriculture commodity related companies owned by AFGRl, collectively referred to as the AFGRI Group.
Primary target firm
[5] The primary target firm is SABA, a banking services provider to clients in various industries. SABA is owned and controlled by the National Bank of Greece ("NBG").
Proposed transaction and rationale
[6] In terms of the proposed transaction, GroCapital will acquire the majority of SABA's share capital from NBG and make a mandatory offer, in terms of s123 of the Companies Act, for all other outstanding shares. Post-transaction, SABA will be solely controlled by GroCapital.
[7] In August 2017, the Tribunal unconditionally approved essentially the same transaction between GroCapital and SABA.[1] However, the Merging Parties were thereafter advised by the South African Reserve Bank ("SARB") that it would enhance their application for regulatory approval if they included the PIC as a shareholder of GroCapital. The Merging Parties thus restructured the acquiring group and re-notified this transaction to the Commission following SARB approval. Hence the only difference between the two transactions is the inclusion of PIC as a part-owner of the acquiring firm.
[8] AFGRI submits that the transaction allows it to grow its financial services offering by acquiring an entity with a banking licence. NBG submitted that the disposal is a result of Greece's financial situation that has constrained capital conditions and reduced growth. The PIC is looking to maximise returns on investment in a new banking entity.
Relevant market and impact on competition
[9] In the previously approved transaction, the Commission assessed the horizontal and vertical overlaps that arose between the AFGRI Group and SABA. It was found that these overlaps would be unlikely to substantially prevent or lessen competition in the relevant markets.[2] These overlaps were not evaluated again in the present transaction.
Information exchange and cross-directorship concerns
[10] As a result of the PlC's interests in various South African banking service providers, the Commission evaluated potential co-ordinated effects in the broad market for the provision of banking services. The Commission found that some of the PIC's interests grant it access to confidential information and the ability to appoint members onto the board of directors of the relevant banking entities. Post-transaction, the PIC will also be able to influence operations and appoint directors of GroCapital, the sole controller of SABA.
[11] The PIC as a mutual shareholder thus represents a potential platform for sharing of sensitive information and a mechanism to facilitate
collusion between competing banking service providers. To address these concerns, the merging parties have agreed that the PIC will not appoint any person onto the board of GroCapital or SABA who is, or has been in the preceding six months, a member of the board of a competing banking service provider. Further, the PJC will ensure measures are in place to prevent the exchange of sensitive
information, including confidentiality undertakings by representatives on the GroCapital and SABA boards.
[12] We are satisfied that the imposed conditions adequately address any concerns relating to information exchange and cross directorships
between competitors.
Public interest
[13] The Merging Parties submit that the proposed transaction will not result in any job losses.[3] All relevant employee representatives were contacted by the Commission and no concerns were raised. The Commission was satisfied
that the proposed transaction is unlikely have a negative impact on employment or raise any other public interest concerns.
Conclusion
[14] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market and that any potential co-ordination concerns are adequately addressed by the conditions. In addition, no public interest issues arise from the proposed transaction. Accordingly, we approve the proposed transaction subject to the conditions attached hereto as 'Annexure A'.
Mr Norman Manoim
Mrs Medi Mokuena and Ms Andiswa Ndoni
21 September 2018
Date
Tribunal Researcher:
Jonathan Thomson
For the merging parties Andries Le Grange of Cliffe Dekker Hofmeyr Inc
For the Commission:
Billy Mabatamela
[1] GroCapital Holdings (Pty) Ltd And South African Bank of Athens Ltd LM077Jun17
[2] LM007Jun17, Para 12
[3] Paragraph 8, page 47 of the Commission’s Record.
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