JMR Holdings (Pty) Ltd v Transaction Capital Limited (LM104Sep16) [2016] ZACT 98 (14 November 2016)
- Citation
- [2016] ZACT 98
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Mondo Mazwai, Yasmin Carrim, lmraan Valodia
- Case number
- LM104Sep16
More details
- Court
- Competition Tribunal
- Panel
- Mondo Mazwai, Yasmin Carrim, lmraan Valodia
- Case number
- LM104Sep16
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that JMR Holdings (Pty) Ltd is a dormant firm and the transaction is essentially an internal restructuring, whereby the JMR trusts will indirectly hold their existing shareholding in Transaction Capital Limited, with a minor increase of 0.33%. The Commission's investigation revealed no change in market structure or accretion of market share. The Tribunal agreed with the Commission that the merger is unlikely to substantially prevent or lessen competition in any market in South Africa. Furthermore, there are no negative effects on employment or other public interest concerns. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The large merger between JMR Holdings (Pty) Ltd and Transaction Capital Limited is approved unconditionally.
02
Material facts
Parties
JMR Holdings (Pty) Ltd
Applicant Counsel: Richardt van RansburgTransaction Capital Limited
RespondentAmounts and remedies
- Shareholding Acquired: ZAR 43.48
- Shareholding Previously Held by Each JMR Trust: ZAR 14.38
- Additional Shareholding Acquired: ZAR 0.33
- Old Mutual Life Assurance Co. Limited Shareholding in TCL: ZAR 10.2
- Allan Gray (pty) Ltd Shareholding in TCL: ZAR 10.1
03
Procedural history
Posture
Large Merger Review / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger would substantially prevent or lessen competition in any market in South Africa.
- 02
Whether the merger raises any public interest concerns, including effects on employment.
- 03
Whether the transaction constitutes an internal restructuring without market impact.
Party arguments
- Applicant
- The merging parties argued that the transaction is an internal restructuring, allowing the founders of Transaction Capital Limited to maintain effective continuity and control over the TCL group. They submitted that the merger would not alter market dynamics, as JMR Holdings is a dormant entity and the shareholding change is purely indirect. No negative impact on competition or public interest was anticipated.
- Respondent
- The Competition Commission investigated and concluded that the transaction would not result in any accretion of market share or change in market structure. The only overlap is the pre-existing shareholding of the acquiring firm in the target firm. The Commission found no reason to believe the merger would substantially prevent or lessen competition or raise public interest concerns.
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 in any market, or if it raises significant public interest concerns.
- 02
Competition Tribunal precedent
Internal restructurings that do not result in market share accretion or change in control are unlikely to affect competition.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that JMR Holdings (Pty) Ltd is a dormant firm and the transaction is essentially an internal restructuring, whereby the JMR trusts will indirectly hold their existing shareholding in Transaction Capital Limited, with a minor increase of 0.33%. The Commission's investigation revealed no change in market structure or accretion of market share. The Tribunal agreed with the Commission that the merger is unlikely to substantially prevent or lessen competition in any market in South Africa. Furthermore, there are no negative effects on employment or other public interest concerns. Accordingly, the merger was approved without conditions.
Obiter and limits
- The Tribunal noted that internal restructurings of dormant entities rarely raise competition concerns.
- The Tribunal observed that the founders' continued control over TCL is facilitated without adverse market impact.
Court disposition
Merger approved without conditions.
- The large merger between JMR Holdings (Pty) Ltd and Transaction Capital Limited is approved unconditionally.
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: LM104Sep16
In the matter between:
JMR
HOLDINGS (PTY)
LTD
Acquiring Firm
And
TRANSACTION
CAPITAL
LIMITED
Target Firm
Panel
: Mondo Mazwai (Presiding Member)
: Yasmin Carrim (Tribunal Member)
: lmraan Valodia (Tribunal Member)
Heard on
: 12 October 2016
Order Issued on : 12 October 2016
Reasons Issued on : 14 November 2016
Reasons for Decision
APPROVAL
[1] On 12 October 2016, the Competition Tribunal approved a large merger between JMR Holdings (Pty) Ltd ("JMRH") and Transaction Capital Limited (“TCL").
[2] The reasons for the approval follow.
PARTIES
TO THE TRANSACTION AND THEIR ACTIVITIES
Primary Acquiring Firm
[3] The primary acquiring firm is JMRH, a company incorporated in accordance with the laws of South Africa which, pre-merger, is a dormant firm that does not control any other firm. JMRH has three shareholders, the Kimberly Investment Trust ("KlT), the Rutland Trust ("RT") and the Sugar Tube Trust ("STT") which shall be collectively referred to as "the JMR trusts".
Primary Target Firms
[4] TCL is a company incorporated in accordance with the Jaws of the Republic of South Africa and which is not controlled by any firm. KIT, RT and STT each possess a shareholding of 14.38% in TCL. The remaining major shareholders are Old Mutual Life Assurance Co. Limited, possessing a 10.2% share and Allan Gray (Pty) Ltd possessing a 10.1% share.
[5] TCL controls a number of firms and subsidiaries which, collectively as the TCL group are primarily concerned with the provision of specialised financial and allied services in the South African Financial Sector.[1]
PROPOSED
TRANSACTION AND RATIONALE
[6] In terms of an exchange agreement between the merging parties, JMRH intends to acquire 43.48% of the share issue capital of TCL in an asset-for share exchange. This constitutes the 14.38% shareholding held by each of the members of the JMR trust as well as an additional 0.33% acquired from other shareholders of TCL. The merger is in essence an internal restructuring whereby the members of the JMR trusts will use JMRH to indirectly hold their current shareholding (with an additional 0.33%) in TCL.
[7] In terms of rationale, the merging parties submit that the transaction will facilitate continued confidence in and effective continuity and control by the founders of TCL (namely Jonathan Jawno, Michael Mendelowits and Roberto Rossi) over the TCL group.
COMPETITION
ANALYSIS
[8] JMRH is a dormant firm and does not provide any products and/ or services. The TCL group provides specialised financial an allied services in the South African services sector. The Commission investigated the proposed transaction and concluded that the merger presents an overlap only insofar as the acquiring firm has a pre-merger 43.14% shareholding in the target firm.
[9] The Commission concluded that the transaction is unlikely to change the structure of any market as there is no accretion in market share in any market. We find no reason to differ from the Commission's findings that the proposed merger is unlikely to substantially prevent or lessen competition in any market in South Africa.
CONCLUSION
[10] The merger will have no negative effect on employment and does not raise any further public interest concerns. Additionally the merger does not substantially prevent or lessen competition in any market. We therefore approved the merger without conditions.
14 November 2016
Date
_______
Mondo Mazwai
Yasmin Carrim and Prof. lmraan Valodia concurring
Tribunal Researcher: Alistair Dey-Van Heerden
For the Merging Parties: Richardt van Ransburg of ENSAfrica
For the Commission: Zintle Siyo
[1] TCP controls the following Firms: SA Taxi Finance Holdings (Pty) Ltd (which, inturn controls a number of subsidiaries), MBD Credit Solutions Holdings (Pty) Ltd (which, in turn controls a number of subsidiaries), TC Corporate Support (Pty) Ltd, TC Treasury (Pty) Ltd, Nisela Investments, Bayport Financial services (Pty) Ltd, TC Executive Holdings (Pty) Ltd, Transaction Capital Business Partners (Pty) Ltd, Red Sky Finance (Pty) Ltd.
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