Land and Agricultural Development Bank of South Africa v Performing corporate lending book of Gro Capital Financial Services (Pty) Ltd (43/LM/Apr12) [2012] ZACT 52 (10 July 2012)
The Tribunal found that the proposed transaction presents both horizontal and vertical overlaps in the provision of retail and wholesale financing to the agricultural sector. However, post-merger market shares remain below 30%, and there are sufficient alternative suppliers in both upstream and downstream markets....
Source-derived case information.
- Citation
- [2012] ZACT 52
- Parties
- Applicant: Land and Agricultural Development Bank of South Africa; Respondent: Performing corporate lending book of Gro Capital Financial Services (Pty) Ltd
- Court
- Competition Tribunal
- Jurisdiction
- South Africa
- Case Number
- 43/LM/Apr12
- Procedural Posture
- Merger Application / Approval
- Outcome
- Merger approved unconditionally.
- Judges
- Andreas Wessels, Medi Mokuena, Taki Madima
- Legal Topics
- Merger Review, Horizontal Overlap, Vertical Overlap, Retail Financing, Wholesale Financing
Source-derived case record
Summary, issues, holding and outcome
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Parties
Land and Agricultural Development Bank of South Africa
Applicant
Performing corporate lending book of Gro Capital Financial Services (Pty) Ltd
Respondent
Procedural Posture
Merger Application / Approval
Legal Issues
- 1 Whether the proposed merger will substantially prevent or lessen competition in the relevant markets.
- 2 Whether the transaction raises any significant public interest concerns.
Ratio Decidendi
The Tribunal found that the proposed transaction presents both horizontal and vertical overlaps in the provision of retail and wholesale financing to the agricultural sector. However, post-merger market shares remain below 30%, and there are sufficient alternative suppliers in both upstream and downstream markets. The Commission's investigation confirmed that the transaction is unlikely to substantially prevent or lessen competition, and no significant public interest concerns arise. Therefore, the merger was approved unconditionally.
Court Disposition
Merger approved unconditionally.
Orders
- The transaction is approved unconditionally.
Full Case Text
Judgment text and source record
37 paragraphs
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 43/LM/Apr12
In the matter between:
Land and Agricultural Development
Bank of South Africa ….............................................................................Acquiring Firm
And
The performing corporate lending book of
Gro Capital Financial Services (Pty) Ltd …...............................................Target Firm
Panel : Andreas Wessels (Presiding Member) Medi Mokuena (Tribunal Member)
Taki Madima (Tribunal Member)
Heard on : 30 May 2012
Order issued on : 30 May 2012
Reasons issued on : 10 July 2012
Reasons for Decision
Approval
On 30 May 2012 the Competition Tribunal (“Tribunal”) unconditionally approved the merger between Land and Agricultural Development Bank of South Africa and the performing corporate lending book of Gro Capital Financial Services (Pty) Ltd. The reasons for approval are set out below.
Parties to transaction
The primary acquiring firm is the Land and Agricultural Development Bank of South Africa (“Land Bank”), a firm incorporated in terms of the laws of the Republic of South Africa. The Land Bank is regulated by the Land and Agricultural Development Bank Act, No. 15 of 2002 (“the Land Bank Act”) and as such is not controlled by any firm. The Land Bank has only one subsidiary namely Land Bank Insurance Company (Pty) Ltd.
The primary target firm is the performing corporate lending book (“Corporate Lending Book”) of Gro Capital Financial Services (Pty) Ltd (“Gro Cap”), a firm incorporated in terms of the laws of the Republic of South Africa.
Proposed transaction and rationale for transaction
The Land Bank intends to acquire Gro Cap’s Corporate Lending Book which consists of Sale Book Debts.
The Land Bank wishes to acquire the Corporate Lending Book of Gro Capital and grow it further. The Corporate Lending Book will allow the Land Bank to increase its capacity and better fulfil its developmental mandate as set out in the Land Bank Act.
Gro Capital wishes to remove both the Corporate Lending Book and the funding structures relating to the Corporate Lending Book from its balance sheet, thereby enabling Gro Capital to pursue other opportunities with the capital that is released from the sale.
Relevant markets and impact on competition
This transaction presents a horizontal as well as a vertical overlap between the activities of the merging parties. The horizontal overlap relates to the provision of retail financing to agro-processing clients. In terms of the vertical relationship, the Land Bank provides the Corporate Lending Book with wholesale agricultural financing to on-lend to agricultural clients.
The Commission defined a national upstream market for the provision of wholesale financing to the agricultural sector and a downstream national market for the provision of retail financing to the agricultural sector. There however is no need for us to determine the exact parameters of the relevant markets in question since it does not alter our decision in this case.
Following its investigation the Commission concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in the downstream market for the provision of retail financing to the agricultural sector since the merging parties’ post-merger market share remains below 30%. Furthermore, customers indicated that there are alternative suppliers of retail financing. There are also a number of alternative suppliers of wholesale financing to the agricultural sector and therefore it is unlikely that the proposed transaction will raise any foreclosure concerns.
Furthermore, no significant public interest issues arise from this transaction.
CONCLUSION
We approve the transaction unconditionally.
____________________ 10 July 2012
A Wessels DATE
M Mokuena and Taki Madima concurring
Tribunal researcher: Thabo Ngilande
For the merging parties: Edward Nathan Sonnenbergs
For the Commission: Mogau Aphane
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