SPE Mid-Market Fund v K2022654763 (South Africa) Pty Ltd (LM118Sep22) [2022] ZACT 102 (15 November 2022)
- Citation
- [2022] ZACT 102
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- S Goga, M Mazwai, F Tregenna
- Case number
- LM118Sep22
More details
- Court
- Competition Tribunal
- Panel
- S Goga, M Mazwai, F Tregenna
- Case number
- LM118Sep22
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that there is no horizontal overlap between the merging parties, and the vertical overlap is limited to minor service provision with negligible value. The transaction does not create foreclosure concerns or vertical integration that would affect competition. No third-party concerns were raised. The Tribunal accepted the Commission's assessment that the transaction would not result in substantial prevention or lessening of competition. On public interest, the Tribunal found no adverse effect on employment, as no job losses are anticipated and the SPE Fund has no employees in South Africa. The transaction will increase HDP ownership in SkipWaste from 0% to a significant percentage, promoting a greater spread of ownership. The Tribunal concluded that the merger is unlikely to have any negative impact on competition or public interest.
Court disposition
Merger unconditionally approved.
Orders
- The large merger between SPE Mid-Market Fund I Partnership and K2022654763 (South Africa) Pty Ltd is unconditionally approved.
- No conditions are imposed on the transaction.
02
Material facts
Parties
SPE Mid-Market Fund I Partnership (represented by SPE Mid-Market Fund I General Partner Proprietary Limited)
Applicant Counsel: Richardt van Rensburg and Tayla Theron for ENSafricaK2022654763 (South Africa) Pty Ltd
RespondentAmounts and remedies
- Value of Vertical Services Provided by Skip Waste to Sanlam Life Insurance (fiscal Year Ending 28 Feb 2022): ZAR 0
03
Procedural history
Posture
Large Merger Review / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed merger is likely to substantially prevent or lessen competition in any relevant market.
- 02
Whether the transaction raises any public interest concerns, including effects on employment and the spread of ownership among historically disadvantaged persons (HDPs).
Party arguments
- Applicant
- The merging parties argued that there is no horizontal overlap between their activities, as the Acquiring Group's products and services are not substitutes for those of New HoldCo. They asserted that the vertical overlap is minimal, limited to SkipWaste providing garbage collection services to Sanlam Life Insurance, and that the value of these services is de minimis. The parties further contended that there would be no adverse effect on employment, as the SPE Fund has no employees in South Africa or elsewhere, and no job losses are anticipated. Regarding ownership, they submitted that the transaction would increase HDP shareholding in SkipWaste from 0% to a significant percentage, as the SPE Fund and its general partner are 100% black owned under B-BBEE codes.
- Respondent
- No third-party objections were raised. The Commission concurred with the merging parties, finding no horizontal overlap and only a minor vertical relationship. The Commission concluded that the transaction would not result in foreclosure concerns or negatively impact competition. It also found no adverse effects on employment or public interest, and accepted the parties' submissions regarding the positive impact on HDP ownership.
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, section 12A
Public interest considerations include the effect of the merger on employment and the spread of ownership among historically disadvantaged persons.
- 03
Tribunal Merger Recommendations, para [29]
Where the value of vertical overlap is de minimis and there is no vertical integration, foreclosure concerns are unlikely.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that there is no horizontal overlap between the merging parties, and the vertical overlap is limited to minor service provision with negligible value. The transaction does not create foreclosure concerns or vertical integration that would affect competition. No third-party concerns were raised. The Tribunal accepted the Commission's assessment that the transaction would not result in substantial prevention or lessening of competition. On public interest, the Tribunal found no adverse effect on employment, as no job losses are anticipated and the SPE Fund has no employees in South Africa. The transaction will increase HDP ownership in SkipWaste from 0% to a significant percentage, promoting a greater spread of ownership. The Tribunal concluded that the merger is unlikely to have any negative impact on competition or public interest.
Obiter and limits
- The Tribunal noted that the distribution of HDP ownership across categories such as Black Women, Black Youth, and Black Unemployed was considered, and the transaction will have a substantial positive impact on these groups.
- The Tribunal observed that as the Target business currently has no HDP ownership, the transaction will not adversely affect the spread of ownership.
Court disposition
Merger unconditionally approved.
- The large merger between SPE Mid-Market Fund I Partnership and K2022654763 (South Africa) Pty Ltd is unconditionally approved.
- No conditions are imposed on 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: LM118Sep22
In the matter between:
SPE Mid-Market Fund I Partnership
(represented by the general partner,
SPE Mid-Market Fund I
General Partner Proprietary Limited) Primary Acquiring Firm
and
K2022654763 (South Africa) Pty) Ltd Primary Target Firm
Panel: S Goga (Presiding Member)
M Mazwai (Tribunal Member)
F Tregenna (Tribunal Member)
Heard on: 02
November 2022
Order issued on: 02 November 2022
Reasons issued on: 15 November 2022
REASONS FOR DECISION
[1] On 02 November 2022, the Tribunal unconditionally approved the large merger whereby SPE Mid-Market Fund I Partnership (“SPE Fund”) represented by the general partner, SPE Mid-Market Fund I General Partner Pty Ltd (“SPE Fund General Partner”) intends to acquire [.…] of the entire issued share capital of K2022654763 (South Africa) (Pty) Ltd (‘’New HoldCo’’). Post-merger, the SPE Fund will hold [….] of New HoldCo’s issued shares and acquire sole control over New HoldCo.
The parties
[2] The primary acquiring firm is the SPE Fund controlled by its general partner, SPE Fund General Partner, which is controlled by [….] following companies, namely (i) Cavalier Group of Companies (Pty) Ltd (“Cavalier Group of Companies”), (ii) Absolute Pets (Pty) Ltd (“Absolute Pets”)and (iii) Q Link (Pty) Ltd (“Q Link”). The primary acquiring firm is a financial services
group in South Africa, with business interests elsewhere in Africa, the United Kingdom, Europe, India, Australia, Southeast Asia, and the United States of America.[1] Sanlam and its subsidiaries are collectively referred to as the “Acquiring Group”.
[3] The Target firm is K2022654763 (South Africa) (Pty) Ltd (“New HoldCo”). New HoldCo is a newly established investment holding company which controls 100% of Skipwaste Proprietary Limited (“New OpCo”) (“the Target Businesses”)[2]. New HoldCo is jointly controlled by the Susan McDonald Share Trust (“SMST”) (as to
Family Trust (“MFT”) (as to no controlled by any firm or person. The Trustees of both SMST and MFT comprise of the same three individuals. The Target Businesses collectively known as Skipwaste provide integrated general and hazardous waste and environmental
management solutions to commercial, industrial, and retail clients in Gauteng.[3]
The transaction
[4] The proposed transaction involves the SPE Fund, represented by the general partner, the SPE Fund General Partner, acquiring [….]
share capital.[4] As mentioned above, New HoldCo controls New OpCo, which in turn controls the Target Businesses.
Competition Assessment
[5] The Commission assessed the merging parties' activities and it found that there is no horizontal overlap between their activities since none of the Acquiring Group's products and/or services are substitutes for those provided by New HoldCo.
[6] The Commission did note that there is a vertical overlap between the merging parties, since SkipWaste provided Sanlam Life Insurance, a member of the Acquiring Group, with garbage collection and transport services for a total of [….] for the fiscal year that concluded on February 28, 2022.[5] However, after it assessed the above, it found that the proposed transaction is unlikely to result in significant foreclosure concerns in any relevant market.
[7] According to the Commission's assessment, the proposed transaction is unlikely to give rise to any foreclosure concerns in any relevant market given the de minimus value of the services and the absence of any vertical integration as a result of the transaction (i.e., these services have no connection to Sanlam's client-facing operations at all).
[8] No third-party concerns were raised regarding the transaction.
[9] On the evidence before it, the Tribunal agreed with the Commission’s assessment and findings. Having considered the above, the Tribunal is of the view that the proposed transaction is unlikely to result in substantial prevention or lessening of competition in any relevant market.
Public Interest
Effect on employment
[10] The Commission considered whether the proposed transaction would have an adverse effect on employment. According to the merging parties, there will be no reductions or job losses as a result of the proposed transaction. The merging parties assert that the SPE Fund is a private equity fund with no employees in South Africa or elsewhere.
[11] The Commission engaged with the employee representative at Sanlam [….] stated that the employees had not raised any concerns regarding their employment in relation to the proposed transaction. Furthermore, the employee representatives at SkipWaste, [….] raised any concerns about their employment in relation to the proposed transaction.
[12] The Commission concluded that proposed transaction is unlikely to raise employment concerns.
Effect on the spread of ownership
[13] The Commission further assessed the impact on a greater spread of ownership. According to the merging parties, since New HoldCo and New OpCo are new firms with no trading history, they do not yet have any B-BBEE shareholding or credentials. However, both the SPE Fund and its general partner, the SPE Fund General Partner, are 100% black owned funds, according to the B-BBEE Ownership Codes. Furthermore, the Acquiring Group is publicly listed on the Johannesburg Securities Exchange (“JSE”), and its shareholders include HDPs.[6]The merging parties assert that the Sanlam is 49% black owned.[7]
[14] According to the merging parties, Skipwaste has no HDP shareholders. The SPE Fund is 100% black owned under the B-BBEE Ownership Codes applicable to private equity funds. As a result, the proposed transaction will increase the HDP shareholding in SkipWaste from 0% to approximately [….] and promote a greater spread of ownership in the market (however defined) by HDPs.[8] The Commission accepted the merging parties’ submissions and concluded that the proposed transaction is unlikely to have a
negative effect on the greater spread of ownership.
[15] The Tribunal requested information on how the Commission and the merging parties assessed the spread of ownership, as well as whether the distribution of ownership across various people or groups was considered in addition to the overall HDP shareholding.
[16] The Commission noted that they considered the aggregate increase in HDP shareholding, since following the proposed merger, the B-BBEE ownership in the New HoldCo will increase in terms of the aggregate percentage owned by HDPs. In response to questions from the Tribunal the merging parties noted that in their B-BBEE certificates provided to the Commission, information on the spread of ownership across categories such as Black Women, Black New Entrants and Black Designated Groups (including Black Youth, Black Disabled, Black Unemployed, Black People Living in Rural Areas and Black Military Veterans). They note that their certificate shows that the proposed transaction will have a substantial positive impact on the ownership held by Black Women [….] (an increase in ownership of ), Black Youth (an increase in ownership [….] of ) and Black Unemployed (an increase in ownership of [….] ).
[17] Therefore, as the Target business currently does not have any HDP ownership, the Tribunal believes the transaction will not have an adverse impact on the spread of ownership.
Conclusion on public interest
In light of the above, the Tribunal concludes that the proposed transaction is unlikely to have an adverse effect on public interest.
Conclusion
[18] After carefully examining the available evidence, the Tribunal concluded that it is unlikely that the proposed transaction will significantly lessen or prevent competition in any relevant market. Furthermore, there are no public interest concerns raised by the transaction.
Date: 15 November 2022
Presiding Member
Ms Sha’ista Goga
Concurring: Ms Mondo Mazwai and Professor Fiona Tregenna
Tribunal Case Managers: Sinethemba Mbeki
For the Merging Parties: Richardt van Rensburg and
Tayla Theron for ENSafrica
For the Competition: Inga Macingwane and Thabelo Masithulela
[1] The Acquiring Group, through its business clusters, the Sanlam Life and Savings; Sanlam Emerging Markets Cluster; Short-Term Insurance
Cluster; Sanlam Investments Cluster; and Sanlam Private Equity, provides financial solutions to individual and institutional clients across a multitude of market segments.
[2] The target businesses comprising of Consolidated Waste Proprietary Limited (t/a SkipWaste), Future Energy Waste Solutions Proprietary
Limited and African Energy Innovations Proprietary Limited.
[3] Merger Recommendations, p 8 of 19, para [8].
[4] The parties to the proposed transaction include, the SPE Fund, New HoldCo and the Trustees for the time being of SMST and the MacDonald Family Trust. See Merger Record, p58 of 518, para [3.1].
[5] Merger Recommendations, p21 of 24, para [29].
[6] Merger Recommendations, p21 of 24, para [29].
[7] Merger Recommendations, p21 of 24, para [30].
[8] Merger Record, p69 of 518, para [10.5].
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