Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd (107/LM/OCT07) [2007] ZACT 97 (6 December 2007)
- Citation
- [2007] ZACT 97
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- N Manoim, Y Carrim, U Bhoola
- Case number
- 107/LM/OCT07
More details
- Court
- Competition Tribunal
- Panel
- N Manoim, Y Carrim, U Bhoola
- Case number
- 107/LM/OCT07
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd did not give rise to any competition concerns, as Absa Capital had no interest in Tsebo's business activities and the transaction did not result in horizontal or vertical integration. The Tribunal also determined that the merger would not negatively affect employment or raise public interest issues. However, due to the two-stage structure of the transaction and the anticipated changes in shareholding, the Tribunal imposed conditions to ensure clarity regarding the approval and implementation of the second stage. The merger was therefore conditionally approved, subject to the parties clearly setting out the second stage of the transaction.
Court disposition
The merger is conditionally approved, subject to the implementation and clear articulation of the second stage of the transaction.
Orders
- The proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd is conditionally approved.
- The merging parties must implement and clearly set out the second stage of the transaction as recommended by the Tribunal before the merger is finalized.
02
Material facts
Parties
Rickshaw Trade 41 and Invest (Pty) Ltd
Applicant Counsel: Webber Wentzel BowensTsebo Outsourcing Group (Pty) Ltd
Respondent Counsel: Webber Wentzel Bowens03
Procedural history
Posture
Merger Control / Conditional Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd should be approved subject to conditions.
- 02
Whether the transaction raises any competition concerns, including horizontal or vertical effects.
- 03
Whether the transaction has any negative effects on employment or public interest.
Party arguments
- Applicant
- The merging parties argued that the transaction was structured in two stages for commercial reasons, with Rickshaw initially acquiring Tsebo and subsequent shareholding to be distributed among Absa Capital, management trusts, and black economic empowerment parties. They asserted that Absa Capital has no interest in Tsebo's business activities, and the merger would not result in any competition concerns. They further contended that the transaction would not negatively affect employment or raise public interest issues.
- Respondent
- The Commission did not oppose the merger, noting that there were no horizontal or vertical competition concerns as Absa Capital had no interest in Tsebo's business. The Commission erroneously suggested that NomineeCo acted as Absa Capital's nominee, which was clarified by the merging parties. The Commission agreed that the transaction would not adversely affect employment or public interest.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger may be approved subject to conditions to ensure clarity regarding the implementation of the transaction, especially where staged shareholding transfers are anticipated.
- 02
Competition Act, 89 of 1998
A merger that does not result in horizontal or vertical integration between the parties and does not affect competition or public interest may be approved.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd did not give rise to any competition concerns, as Absa Capital had no interest in Tsebo's business activities and the transaction did not result in horizontal or vertical integration. The Tribunal also determined that the merger would not negatively affect employment or raise public interest issues. However, due to the two-stage structure of the transaction and the anticipated changes in shareholding, the Tribunal imposed conditions to ensure clarity regarding the approval and implementation of the second stage. The merger was therefore conditionally approved, subject to the parties clearly setting out the second stage of the transaction.
Obiter and limits
- The Tribunal recommended that the second stage of the transaction be implemented and clearly set out before the merger could be approved, to provide lucidity regarding what was being approved.
- Conditions were attached solely to clarify the approval in light of the anticipated implementation of the second stage, not due to competition or public interest concerns.
Court disposition
The merger is conditionally approved, subject to the implementation and clear articulation of the second stage of the transaction.
- The proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd is conditionally approved.
- The merging parties must implement and clearly set out the second stage of the transaction as recommended by the Tribunal before the merger is finalized.
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.: 107/LM/OCT07
In the matter between:
Rickshaw Trade 41 and Invest (Pty) Ltd
and
Tsebo Outsourcing Group (Pty) Ltd
______________
Panel : N Manoim (Tribunal (Presiding Member) ;
Y Carrim (Tribunal Member) and U Bhoola (Tribunal Member)
Order issued on : 5 December 2007
Reasons decided on : 6 December 2007
REASONS
FOR DECISION
APPROVAL
[1] On 5 December 2007 the Tribunal issued out an order in which it conditionally approved the proposed merger between Rickshaw Trade 41 and Invest (Pty) Ltd and Tsebo Outsourcing Group (Pty) Ltd. The reasons for the decision follow:
THE
PARTIES
[2] The primary acquiring firm is Rickshaw Trade 41 and Invest (Pty) Ltd (âRickshawâ), and the primary target firm is Tsebo Outsourcing Group (Pty) Ltd (âTseboâ). Rickshaw is a shelf company which is a vehicle for the purpose of this proposed transaction, and which does not control any firm and has not traded.
[3] At present Rickshaw is a wholly owned subsidiary of Roodt Nominees (Pty) Ltd (âNomineeCoâ) which is a nominee for the ultimate shareholders.1
[4] Tsebo is a private company which is controlled by Ethos Private Equity Fund IV (Pty) Ltd (âEthos Fund IVâ), which is ultimately controlled by Ethos Holdings Ltd (âEthos Holdingsâ). Tsebo controls various firms and is active in food, catering and facilities management.2
THE
TRANSACTION AND ITS RATIONALE
[5] This proposed transaction is pursuant to a nomination agreement entered into between Rickshaw and Absa Capital. Absa Capital is a division of Absa Bank Ltd, which is a wholly owned subsidiary of Absa Group and is controlled by Barclays Plc. In terms the nomination agreement between these parties, Rickshaw through NomineeCo will purchase the entire issued share capital of Tsebo.
[6] For their own commercial reasons the merging parties decided to structure this transaction in two stages. In the first stage, Rickshaw whilst still controlled by a nominee company will purchase the target firm. In the second stage, the shares in Rickshaw will be transferred in the following manner:
1) 49.9% to Absa Capital;
2) 20% to the members of management via three Trusts created for their
exclusive benefit;
3) 30.1% to a nominee company, (it is intended that not less than 30% will be
transferred to one or more black economic empowerment parties nominated
by Absa Capital, and the balance of up to 0.1% to other investment
consortium members to be nominated by Absa Capital).
[7] Given the shareholding that will emerge in the second stage, the merged company can be considered to be controlled either solely by Absa Capital or jointly by Absa Capital together with one of the other shareholders.
[8] At the hearing the Tribunal recommended that the second stage of this transaction be implemented, and clearly set out, before this merger could be approved, hence the conditions which are attached to the approval of this merger.
THE
RELEVANT MARKET AND COMPETITION EVALUATION
[9] It is common cause that Absa Capital has no interest in the business activities of Tsebo. For this reason this merger does not lead to any horizontal or vertical concerns.
CONCLUSION
[10] This proposed merger does not have any negative effects on employment nor does it raise any public interest issues. Conditions have been attached for the sole reason to provide lucidity as to what the Tribunal has approved particularly in light of the implementation of the second stage of the proposed transaction as was anticipated by the merging parties.
___
______
N Manoim 6 December 2007
Presiding Member
Concurring: Y Carrim and U Bhoola
Tribunal Researcher: L. Xaba
For the Commission : I Selaledi
Mergers and Acquisitions
For the merging parties : Webber Wentzel Bowens
1 The merging parties pointed out at the hearing that NominneCo has no economic interest in this proposed transaction and does not as the Commission erroneously pointed out, act under the direction of Absa Capital as Absa Capitalâs nominee
2 These include Tsebo Holding and Operations (Pty) Ltd; Fedics Strategic Investments (Pty)Ltd; Drake and Scull Facilities Management (SA) (Pty)Ltd; Kraal Kraft (Pty) Ltd; and Invalu (Pty) Ltd
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