Macquarie Africa (Pty) Ltd v Macquarie First South (Pty) Ltd (LM141Sep15) [2015] ZACT 105 (27 November 2015)
- Citation
- [2015] ZACT 105
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Andiswa Ndoni, Medi Mokuena
- Case number
- LM141Sep15
More details
- Court
- Competition Tribunal
- Panel
- Yasmin Carrim, Andiswa Ndoni, Medi Mokuena
- Case number
- LM141Sep15
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in any market, as the acquiring firm was already a 50% shareholder and the transaction would not alter market structure or result in market share accretion. The vertical relationship between the parties was not likely to result in foreclosure concerns due to the low market share of MFSC and the presence of other competitors. Public interest concerns were limited to three employees, and the merging parties undertook to consider redeployment before retrenchment. No other significant public interest concerns were identified. Accordingly, the Tribunal approved the transaction unconditionally.
Court disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Macquarie Africa (Pty) Ltd and Macquarie First South (Pty) Ltd is approved unconditionally.
- No conditions are imposed on the approval of the transaction.
02
Material facts
Parties
Macquarie Africa (Pty) Ltd
Applicant Counsel: Candice UpfoldMacquarie First South (Pty) Ltd
RespondentAmounts and remedies
- Number of Employees Potentially Affected: 3
- Total Staff Complement of Target Group: 100
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition would substantially prevent or lessen competition in any market.
- 02
Whether the transaction raises significant public interest concerns.
Party arguments
- Applicant
- Macquarie Africa argued that the acquisition would allow it to expand its footprint in Sub Saharan Africa by growing its presence in South Africa. The transaction would not alter the competitive structure of any market, as Macquarie Africa already held a 50% shareholding in Macquarie First South and would simply increase this to 100%. The parties submitted that only three employees might be affected, and redeployment would be considered before any retrenchment.
- Respondent
- The Commission contended that the transaction would not result in any accretion of market share or change the structure of any market, as the parties do not compete outside the joint venture. The vertical relationship between MFSC and the acquiring group's subsidiaries was unlikely to result in foreclosure concerns due to MFSC's low market share and the presence of many competitors. The Commission also found that public interest concerns were limited and not significant.
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.
- 02
Competition Act, No. 89 of 1998
Public interest considerations must be assessed, including the effect on employment and the ability of small businesses to compete.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in any market, as the acquiring firm was already a 50% shareholder and the transaction would not alter market structure or result in market share accretion. The vertical relationship between the parties was not likely to result in foreclosure concerns due to the low market share of MFSC and the presence of other competitors. Public interest concerns were limited to three employees, and the merging parties undertook to consider redeployment before retrenchment. No other significant public interest concerns were identified. Accordingly, the Tribunal approved the transaction unconditionally.
Obiter and limits
- The Tribunal noted that the merging parties' approach to redeployment and retrenchment of affected employees was appropriate and consistent with public interest obligations.
- The Tribunal observed that the transaction was unlikely to have any adverse effect on competition or the broader financial services market in South Africa.
Court disposition
The proposed transaction is approved unconditionally.
- The merger between Macquarie Africa (Pty) Ltd and Macquarie First South (Pty) Ltd is approved unconditionally.
- No conditions are imposed on the approval of the transaction.
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: LM141Sep15
In the matter between:
Macquarie Africa (Pty) Ltd
Acquiring Firm
and
Macquarie First South (Pty) Ltd
Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Andiswa Ndoni (Tribunal Member)
: Medi Mokuena (Tribunal Member)
Heard on
: 04 November 2015
Order issued on
: 04 November 2015
Reasons issued on : 27 November 2015
Reasons for Decision
Approval
1. On 04 November 2015 the Competition Tribunal (the "Tribunal") unconditionally approved an acquisition by Macquarie Africa (Pty) Ltd ("Macquarie Africa") of Macquarie First South (Pty) Ltd ("Macquarie First South").
2. The reasons for the approval of the proposed transaction follow.
The Parties and their activities
3. The primary acquiring firm is Macquarie Africa, a company incorporated in in accordance with the laws of the Republic of South
Africa. Macquarie Africa is controlled by Macquarie Corporate Finance Limited ("Macquarie Corporate Finance"), which is ultimately controlled by Macquarie Group Limited ("Macquarie Group"). Macquarie Group is a public company listed on the Australian Securities Exchange and is not controlled by any firm. The five largest shareholders of Macquarie Group as at 22 April 2015 are the following: HSBC Custody Nominees (Australia) Limited (21.52%), JP Morgan Nominees Australia Limited (16.70%), National Nominees Limited (13.34%), Citicorp Nominees (Pty) Ltd (6.39%) and Bond Street Custodians Limited (5.98%).
4. Macquarie Africa controls the following firms: Macquarie Investments (Pty) Ltd ("Macquarie Investments"), African Infrastructure
Investment Managers (Pty) Ltd ("AllM"), and African Infrastructure Investment Fund 2 GP (Ply) Ltd ("AllF2").
AllM in turn controls African Infrastructure Investment Fund ("AllF") and South African Infrastructure Fund ("SAIF").
5. Macquarie Group is an international provider of specialist financial, banking, advisory, investment and fund management services. In South Africa, Macquarie Group is involved in the provision of institutional stock broking, equity financing, equity derivatives, structured finance and corporate and project finance advisory services.
6. The primary target firm is Macquarie First South, a company incorporated in accordance with the laws of the Republic of South
Africa. Macquarie First South is a 50/50 joint venture between Macquarie Africa (the primary acquiring firm) and First South
Financial Services (Pty) Ltd ("FSFS"). FSFS is controlled by J&J Financial Services (Pty) Ltd ("J&J Financial
Services"). J&J Financial Services is controlled by Jay and Jayendra (Pty) Ltd ("J&J Group").
Macquarie First South controls Macquarie First South Securities (Pty) Ltd ("MFSS") and Macquarie First South Capital (Pty) Ltd ("MFSC").
7. Macquarie First South is an investment company with interests in the financial services industry. Macquarie First South's activities are undertaken through its two subsidiaries, i.e. MFSS and MFSC. MFSS and MFSC are involved in equities research, sales and trading services and corporate finance services respectively.
Proposed transaction and rationale
8. The proposed transaction involves a share repurchase by Macquarie First South of FSFS' 50% shareholding interest in the issued share capital of Macquarie First South. On completion of the proposed transaction, Macquarie Africa will become the sole shareholder and exercise sole control over Macquarie First South.
9. The rationale for Macquarie Africa is that it wants to expand its footprint in Sub Saharan Africa by growing its presence in South Africa.
10.According to FSFS, the proposed transaction provides it with an opportunity to realise its investment.
Competition Analysis
11. The Commission found that there is a horizontal overlap in the activities of the merging parties as Macquarie Africa has 50%
shareholding in Macquarie First South and is increasing its shareholding to 100%. The Commission however found that this overlap
does not change the structure of any market and there will be no accretion in market share as Macquarie is simply increasing its
shareholding in Macquarie First South. The Commission also found that the merging parties do not compete outside the joint venture.
12. The Commission further found that there is a vertical relationship in the activities of the merging parties as MFSC has provided corporate advisory services to two of the acquiring group's subsidiaries, i.e. AllF and SAIF. The Commission however found that this relationship is unlikely to result in any foreclosure concerns as MFSC has a market share of less than 10% in the market for corporate advisory services and there are many other firms it competes with in this market. The Commission therefore concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in any market.
Public interest
13. The merging parties submitted that as a result of this transaction, the current Regional Head of Sub Saharan Africa for Macquarie Africa, Dr. Duarte da Silva will leave Macquarie Africa by mutual agreement to focus his efforts on FSFS, which he co-founded in 2002. Dr Duarte is currently supported by two staff members who occupy the positions of executive assistant and administrator. The merging parties further submitted that they will investigate the redeployment of these two staff members and if redeployment is not possible, potential retrenchment will commence.
14. The Commission established that Macquarie First South and its subsidiaries have a total staff complement of approximately 100 as at 30 September 2015. The Commission concluded that the proposed transaction is unlikely to result in significant public interest concerns as the positions that are likely to be affected are skilled are only limited to 3 employees. The proposed transaction raises no other public interest concerns.
Conclusion
15. In light of the above, we agree with the Commission that the proposed transaction is unlikely to substantially prevent or lessen
competition in any market Further, we agree with the Commission that proposed transaction is unlikely to result in significant
public interest concerns. We therefore approve the proposed transaction unconditionally.
27 November 2015
Date
_______
Ms Yasmin Carnm
Ms Andiswa Ndoni and Ms Medi Mokuena concurring
Tribunal Researcher :
lpeleng Selaledi
For the merging parties :
Candice Upfold of Norton Rose Fulbright
For the Commission :
Prishani Maheeph
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