Old Mutual Life Assurance Company (South Africa) v Liberty Star Consumer Holdings (Pty) Ltd (57/LM/Jul11) [2011] ZACT 65 (5 September 2011)
The Tribunal found that there is no overlap in the activities of Old Mutual and Libstar, and Old Mutual does not control any firms competing with Libstar in the fast moving consumer goods market. The Tribunal considered the potential for vertical foreclosure due to Old Mutual's interests in Metcash but accepted the...
Source-derived case information.
- Citation
- [2011] ZACT 65
- Parties
- Applicant: Old Mutual Life Assurance Company (South Africa); Respondent: Liberty Star Consumer Holdings (Pty) Ltd
- Court
- Competition Tribunal
- Jurisdiction
- South Africa
- Case Number
- 57/LM/Jul11
- Procedural Posture
- Merger Control / Approval
- Outcome
- The proposed transaction is approved unconditionally.
- Judges
- Norman Manoim, Andreas Wessels, Yasmin Carrim
- Legal Topics
- Merger Control, Vertical Foreclosure, Negative Control, Public Interest, Market Structure
Source-derived case record
Summary, issues, holding and outcome
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Parties
Old Mutual Life Assurance Company (South Africa)
Applicant
Liberty Star Consumer Holdings (Pty) Ltd
Respondent
Procedural Posture
Merger Control / Approval
Legal Issues
- 1 Whether the proposed acquisition by Old Mutual of a direct shareholding in Libstar will substantially prevent or lessen competition in any market.
- 2 Whether the transaction raises any vertical foreclosure concerns due to Old Mutual's interests in Metcash.
- 3 Whether the transaction gives rise to any public interest issues.
Ratio Decidendi
The Tribunal found that there is no overlap in the activities of Old Mutual and Libstar, and Old Mutual does not control any firms competing with Libstar in the fast moving consumer goods market. The Tribunal considered the potential for vertical foreclosure due to Old Mutual's interests in Metcash but accepted the parties' submissions that Old Mutual's stake does not confer the ability to dictate Metcash's purchasing strategy, and Libstar has no incentive or ability to foreclose in favour of Metcash. The transaction does not raise any public interest concerns. Accordingly, the Tribunal concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in...
Court Disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Old Mutual Life Assurance Company (South Africa) and Liberty Star Consumer Holdings (Pty) Ltd is approved without conditions.
Full Case Text
Judgment text and source record
40 paragraphs
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 57/LM/Jul11
In the matter between:
Old Mutual Life Assurance Company (South Africa) …..................................Acquiring Firm
And
Liberty Star Consumer Holdings (Pty) Ltd ….........................................................Target Firm
Panel : Norman Manoim (Presiding Member)
Andreas Wessels (Tribunal Member)
Yasmin Carrim (Tribunal Member)
Heard on : 24/08/2011
Order issued on : 24/08/2011
Reasons issued on : 05/09/2011
Reasons for Decision
APPROVAL
On 24 August 2011 the Competition Tribunal (“Tribunal”) unconditionally approved the proposed transaction involving Old Mutual Life Assurance Company of South Africa (“OMLACSA”) and Liberty Star Consumer Holdings (“Libstar”). The reasons for approval of the proposed transaction follows below.
THE TRANSACTION AND RATIONALE
In terms of the proposed transaction Old Mutual which currently already has 9.38%1 indirect shareholding in Libstar intends to acquire 14.952% direct shareholding in Libstar from Absa Bank. Post transaction, OMLACSA
will control Libstar, and will be entitled to exercise veto rights in Libstar through the negative control obtained consequent to this transaction.
OMLACSA views the proposed transaction as an attractive investment opportunity which will expand its investment footprint in the food manufacturing sector in South Africa. For Libstar, the transaction will give it access to finance, and for ABSA, the seller, this is an opportunity to realise its investment.
OMLACSA is active in the insurance industry and provides different products such as life policy, assistance policies, disability policies, health policies, reclassified retrenchment cover as well as sinking fund policies to individuals and groups. Libstar is an investment holding company with various subsidiaries active in the South African fast moving consumer goods market,2 with specific focus on companies active in the contact manufacturing and private label industries.
COMPETITION ASSESSMENT
There is no overlap in the activities of the merging parties as OMLACSA does not control any firms which compete with Libstar in the fast moving consumer goods market.
During the hearing, the question was raised whether there could potentially be any vertical concerns arising from this deal given that Old Mutual group has underlying business interests in the food manufacturing sector in South Africa, as it has a non-controlling
effective 42.56% interest in Metaf Investment Holdings, which in turn owns 100% of the share capital of Metcash Trading Africa.
Further, Old Mutual also holds 9.7% of the shares in Metcash.
The merging parties submitted that there is no prospect of vertical foreclosure as Old Mutual’s stake in Metcash does not give it the ability to dictate Metcash’s purchasing strategy. It was also said that Metcash’s policy does not allow it to stock particular brands to the exclusion of other brands, and that Libstar has no incentive to foreclose in favour of Metcash as it has no shares in Metcash. Furthermore that Old Mutual’s interest in Libstar merely gives it negative control and not the ability to dictate the operations of the underlying investee companies.
PUBLIC INTEREST
This deal does not give rise to any public interest issues.
CONCLUSION
Having regard to these considerations, we find that the proposed transaction is unlikely to substantially prevent or lessen
competition in any market. It also will not change the structure of any market given that there is no overlap in the activities of the merging parties. The transaction is therefore approved without conditions.
____________________ 05/09/2011
N Manoim Date
Y Carrim and A Wessels concurring
Tribunal Researcher: Londiwe Senona
For the merging parties: Cliffe Dekker Hofmeyr
For the Commission: Noma Tsego and Lindiwe Khumalo
1This is held through Lereko Metier Capital Growth Fund (“LMCGF”).
2This includes goods such as wet condiments, sauces, salad dressing, toiletries, confectionery, cereal, herbs and spices and cheese.
3