RH Bophelo Operating Company (Pty) Ltd v Perthpark Properties (LM154Feb20) [2020] ZACT 16 (14 April 2020)
- Citation
- [2020] ZACT 16
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Mondo Mazwai, Imraan Valodia, Fiona Tregenna
- Case number
- LM154Feb20
More details
- Court
- Competition Tribunal
- Panel
- Mondo Mazwai, Imraan Valodia, Fiona Tregenna
- Case number
- LM154Feb20
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that although there is a horizontal overlap in the provision of acute multidisciplinary inpatient private hospital services, there is no geographic overlap since the acquiring group does not operate hospitals in the Western Cape. The merging parties are part of the National Hospital Network, and the transaction is unlikely to affect tariff negotiations or result in anti-competitive effects. No job losses or other public interest concerns were identified. Accordingly, the Tribunal concluded that the proposed transaction would not substantially prevent or lessen competition in any relevant market and would not have adverse public interest effects. The merger was approved unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed transaction is approved without conditions.
02
Material facts
Parties
RH Bophelo Operating Company (Pty) Ltd
Applicant Counsel: P BodloPerthpark Properties
RespondentAmounts and remedies
- Gross Leasable Area of Hospital Property (gla): ZAR 17,700
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed merger would substantially prevent or lessen competition in the relevant market.
- 02
Whether the transaction raises any public interest concerns, including job losses.
Party arguments
- Applicant
- RH Bophelo argued that the transaction would strengthen its asset base in the Western Cape and provide affordable private hospital costs. It claimed that, in a market dominated by three large hospital groups, RH Bophelo offers a platform for stand-alone BEE hospitals like RMC to access capital and expand services, with synergies between RMC and other private hospitals. The parties confirmed that no changes to tariff negotiations would occur and that there may be procurement synergies.
- Respondent
- The Commission contended that there is a horizontal overlap in the provision of acute multidisciplinary inpatient private hospital services but no geographic overlap, as the acquiring group has no hospitals in the Western Cape. The Commission found that hospitals compete nationally on price and non-price factors, and the transaction was unlikely to result in tariff changes at RMC. It concluded that the merger would not substantially prevent or lessen competition and that no job losses or other public interest concerns would arise.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, 89 of 1998
Public interest considerations, including employment effects, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that although there is a horizontal overlap in the provision of acute multidisciplinary inpatient private hospital services, there is no geographic overlap since the acquiring group does not operate hospitals in the Western Cape. The merging parties are part of the National Hospital Network, and the transaction is unlikely to affect tariff negotiations or result in anti-competitive effects. No job losses or other public interest concerns were identified. Accordingly, the Tribunal concluded that the proposed transaction would not substantially prevent or lessen competition in any relevant market and would not have adverse public interest effects. The merger was approved unconditionally.
Obiter and limits
- The Tribunal noted that the presence of stand-alone BEE hospitals in the market may enhance competition and access to capital for expansion.
- Synergies in procurement may arise from the merger, but these do not raise competition concerns.
Court disposition
Merger approved unconditionally.
- The proposed transaction is approved without conditions.
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: LM154Feb20
In the matter between:
RH Bophelo Operating Company (Pty) Ltd
Primary Acquiring Firm
And
Perthpark Properties in respect of the Shares and Primary Target Firm
Claims in Rondebosch Medical Centre (Pty) Ltd and
Broadcount Investments (Pty) Ltd in respect of
property known as Rondebosch Medical Centre
Hospital Property
Panel: Ms Mondo Mazwai (Presiding Member)
Prof. Imraan Valodia (Tribunal Member)
Prof. Fiona Tregenna (Tribunal Member)
Heard on: : 11 March 2020
Order Issued on: 11 March 2020
Reasons Issued on: 14 April 2020
REASONS
FOR DECISION
Approval
1. On 11 March 2020, the Competition Tribunal unconditionally approved a proposed merger transaction whereby RH Bophelo Operating Company (Pty) Ltd intends to acquire control of Rondebosch Medical Centre and Rondebosch Medical Centre Hospital Property.
2. The reasons for our approval follow.
Parties to the transaction
Primary Acquiring Firm
3. RH Bophelo Operating Company (Pty) Ltd (“RH Bophelo”) is a listed company that holds various equity interests in a number of private hospitals which are located in the North West and Gauteng Provinces. It also has a sole interest in a medical operating management, services and facilities company which operates and manages three hospital facilities. Two of these hospital facilities are located in the Free State and one is in Gauteng. RH Bophelo also manages a number of medical facilities in the North West and in Mpumalanga.
4. The Public Investment Corporation (“PIC”) controls RH Bophelo.
Primary Target Firm
5. The Rondebosch Medical Centre (“RMC”) provides acute hospital services which include medical services, paediatric services, intensive care services and maternity services.
6. The Rondebosch Medical Centre Hospital Property (“Hospital Property”) comprises a collective gross leasable area (GLA) of 17 700m2. RMC is located on this property.
7. RMC already holds a 30% shareholding in RH Bophelo. The remainder of the shares are held by Perthpark Properties and other minority shareholders.
Proposed transaction
8. The proposed transaction entails RH Bophelo increasing its 30% shareholding in RMC to a 100% shareholding; and the acquisition of ownership and control over the Hospital Property.
9. In 2008, RH Bophelo acquired a 30% shareholding in RMC with an option to increase its shareholding by a certain percentage within four years after the acquisition of the 30% shareholding. RH Bophelo therefore wishes to offer to exercise its option and to acquire an additional stake in RMC, the Hospital Property, and RMC Pharmacy.
10. In terms of the proposed transaction, RH Bophelo will acquire (i) the remaining 70% shareholding and loan claims in RMC; (ii) sole control of the Hospital Property, and (iii) the entire share and claims for RMC Pharmacy through RMC. Upon implementation of the proposed transaction, RH Bophelo will exercise direct control over RMC and the Hospital Property; and indirect control over the RMC Pharmacy though RMC.
11. RH Bophelo submitted that the proposed transaction will, inter alia, bolster RH Bophelo’s asset base in the Western Cape Province and in line with its mandate, provide affordable private hospital
costs. RMC submitted that in a market dominated by three large hospital groups[1], RH Bophelo provides a platform for stand-alone BEE hospitals such as RMC to join, which allows for, inter alia, access to capital for the growth and expansion of services offered by RMC and synergies between RMC and other private hospitals.
Competition Assessment
12. The Commission found that there was a horizontal overlap in the activities of the parties in the provision of acute multidisciplinary inpatient private hospital services; and considered this to be the relevant product market.
13. It found however that there was no geographic overlap in the activities of the merging parties since none of the hospitals in which the acquiring group (including the PIC) has a controlling interest, are located in the Western Cape.
14. In the national market (for the provision of acute multidisciplinary inpatient hospital services), the Commission found that hospitals compete on price and non-price factors. RH Bophelo’s hospitals and RMC are part of the National Hospital Network (“NHN”)
and negotiate tariffs on their behalf and other independent hospital groups. The Commission was of the view that the proposed transaction
was unlikely to result in tariff changes at RMC.
15. At the hearing the merging parties confirmed that there would be no changes to tariff negotiations through the NHN (at a national level), and that there may be some synergies in procurement.[2]
16. For the reasons above, we were satisfied that the proposed transaction was unlikely to substantially prevent or lessen competition in the relevant market.
Public interest
17. The merging parties submitted that no job losses will occur as a result of the proposed transaction. Employees were notified of the transaction and no concerns were raised.
18. No other public interest issues arise from the proposed transaction.
Conclusion
19. In view of the above, we were satisfied that the proposed transaction was unlikely to substantially prevent or lessen competition in any relevant market. In addition, the proposed transaction will not result in job losses or have adverse effects on any other public interest issues.
20. We therefore approved the proposed transaction without conditions.
14 April 2020
Date
_____
Ms Mondo Mazwai
Prof. Fiona Tregenna and Prof. Imraan Valodia concurring
Tribunal Case Manager: Ndumiso Ndlovu
For the Merging Parties: P Bodlo of Motsoeneng Bill Attorneys Inc.
For the Commission: S Moshoma and R Maphwanya
[1] These are Netcare Limited, Mediclinic Southern Africa, and Life Healthcare group Holdings Limited.
[2] Transcript p7 lines 9-16 and p8 lines 10-18
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