STANLIB Insfrastructure Yield Fund v AFGRI Grain Silo Company (Pty) Ltd (LM160Feb20) [2020] ZACT 21 (30 April 2020)
- Citation
- [2020] ZACT 21
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- E Daniels, A Wessels, I Valodia
- Case number
- LM160Feb20
More details
- Court
- Competition Tribunal
- Panel
- E Daniels, A Wessels, I Valodia
- Case number
- LM160Feb20
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that Stanlib IYF's acquisition of an additional 5.05% shareholding in AGS, resulting in negative control, did not create horizontal overlaps or raise competition concerns, as neither Stanlib IYF nor Standard Bank are active in the grain storage market. The transaction was structured to allow Stanlib IYF to exercise governance rights without affecting market competition. The Commission's investigation confirmed that there would be no negative employment effects, and the sale of shares by AGH and Izitsalo was consistent with their temporary holding arrangement. The transaction did not adversely affect the spread of ownership by historically disadvantaged persons or workers. No other public interest concerns were identified. Accordingly, the Tribunal approved the merger unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The large merger between Stanlib Infrastructure Yield Fund (represented by Stanlib Infrastructure GP 2 (Pty) Ltd) and AFGRI Grain Silo Company (Pty) Ltd is approved without conditions.
02
Material facts
Parties
STANLIB Infrastructure Yield Fund represented by its general partner STANLIB Infrastructure GP 2 (Pty) Ltd
Applicant Counsel: D Rudman and B PhillipsAFGRI Grain Silo Company (Pty) Ltd
RespondentAmounts and remedies
- Stanlib IYF Post Merger Shareholding in AGS (%): 30
- Stanlib IYF Pre Merger Shareholding in AGS (%): 24.95
- Additional Shares Acquired (%): 5.05
03
Procedural history
Posture
Large Merger Review / Approval
04
Questions and positions
Legal issues
- 01
Whether the acquisition of additional shares by Stanlib IYF in AGS would confer negative control and affect competition in the grain storage market.
- 02
Whether the transaction would have any adverse public interest effects, including on employment and ownership by historically disadvantaged persons.
Party arguments
- Applicant
- Stanlib IYF argued that acquiring additional shares in AGS aligns with its investment mandate and provides governance protection. The acquisition was a result of exercising a pre-emptive right after a previous investor withdrew, and the shares were held temporarily by AGH and Izitsalo for future sale. Stanlib IYF submitted that the transaction would not affect competition or public interest negatively.
- Respondent
- AGS and the sellers (AGH and Izitsalo) maintained that the shares were always intended for sale to a replacement buyer and that the transaction would not result in retrenchments or negatively affect the spread of ownership by historically disadvantaged persons or workers. The Commission supported these submissions, finding no competition or public interest concerns.
05
Court’s reasoning
Legal principles
- 01
AGS Memorandum of Incorporation
A firm holding 25% or more of voting rights in AGS possesses negative control, enabling it to veto reserved matters such as business plan approval and CEO appointment.
- 02
Competition Act No. 89 of 1998, section 12A
A merger may not be approved if it substantially lessens or prevents competition in any market, unless justified by public interest considerations.
- 03
Competition Act No. 89 of 1998, section 12A(3)(e)
The effect of a merger on the promotion of a greater spread of ownership by historically disadvantaged persons and workers must be considered.
- 04
Commission findings and AGS transaction structure
Temporary shareholding pending sale to a replacement buyer does not constitute a negative public interest effect.
- 05
Commission assessment
No horizontal overlap exists where the acquiring firm and its controllers are not active in the relevant market.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that Stanlib IYF's acquisition of an additional 5.05% shareholding in AGS, resulting in negative control, did not create horizontal overlaps or raise competition concerns, as neither Stanlib IYF nor Standard Bank are active in the grain storage market. The transaction was structured to allow Stanlib IYF to exercise governance rights without affecting market competition. The Commission's investigation confirmed that there would be no negative employment effects, and the sale of shares by AGH and Izitsalo was consistent with their temporary holding arrangement. The transaction did not adversely affect the spread of ownership by historically disadvantaged persons or workers. No other public interest concerns were identified. Accordingly, the Tribunal approved the merger unconditionally.
Obiter and limits
- The Tribunal noted that the pre-existing business relationship between Standard Bank and AGS, involving financial services, was too remote to affect the competition assessment.
- The Commission's approach to evaluating temporary shareholdings in the context of public interest was endorsed as appropriate for this transaction.
Court disposition
Merger approved unconditionally.
- The large merger between Stanlib Infrastructure Yield Fund (represented by Stanlib Infrastructure GP 2 (Pty) Ltd) and AFGRI Grain Silo Company (Pty) Ltd 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: LM160Feb20
In the matter between
STANLIB Infrastructure Yield Fund
represented by its general partner
STANLIB Infrastructure GP 2 (Pty) Ltd Primary Acquiring Firm
And
AFGRI Grain Silo Company (Pty) Ltd Primary Target Firm
Panel: Mr E Daniels (Presiding Member)
: Mr. A Wessels (Tribunal Member)
: Prof. I Valodia (Tribunal Member)
Heard on: 31 March 2020
Order Issued on: 31 March 2020
Reasons Issued on: 30 April 2020
REASONS
FOR DECISION
APPROVAL
[1] On 31 March 2020, the Competition Tribunal (“Tribunal”) unconditionally approved a large merger between STANLIB
Infrastructure Yield Fund represented by its general partner STANLIB Infrastructure GP 2 (Pty) Ltd and AFGRI Grain Silo Company (Pty) Ltd.
[2] The reasons for the approval of the proposed transaction follow.
PARTIES
TO THE PROPOSED TRANSACTION
Primary acquiring firm
[3] The primary acquiring firm is STANLIB Infrastructure Yield Fund (“Stanlib IYF”), being represented by its general partner STANLIB Infrastructure GP 2 (Pty) Ltd (“Stanlib GP 2”). Stanlib IYF is ultimately controlled by the Standard Bank Group Ltd (“Standard Bank”) which is listed on the JSE, but is not controlled by any firm.
[4] Stanlib IYF is a private equity investment fund that acquires infrastructure assets with long-term potential.
Primary target firm
[5] The primary target firm is AFGRI Grain Silo Company (Pty) Ltd (“AGS”), a private company incorporated in South Africa.
AGS does not control any firms, and is not controlled by any firm.
[6] AGS is a grain storage business, comprised of 79 grain silo and bunker storage facilities located in six provinces[1] that service
farmers and other customers. These facilities store grains such as maize, wheat, sunflower, soya beans, barley and sorghum.
BACKGROUND
TO THE PROPOSED TRANSACTION
[7] AFGRI Group Holdings (Pty) Ltd (“AGH”) formerly operated its grain storage business through AFGRI Operations (Pty) Ltd (“AFGRI Operations”), which it controls. AGH then sought to raise capital by selling its grain storage business. In order to effect this sale, AGH transferred its grain storage business from AFGRI Operations to AGS (a special purpose vehicle).[2]
[8] Various firms subsequently purchased shares in AGS, including Stanlib IYF whose shareholding prior to the proposed transaction was 24.95%. As per the AGS memorandum of incorporation (“MOI”), a firm’s shareholding in AGS is essentially equivalent to the percentage of general voting rights it possesses.
[9] Of relevance to the proposed transaction is another term in the AGS MOI which states that 75% of the general voting rights are required to pass a reserved matter. Reserved matters include the approval and amendment of AGS’s business plan as well as the appointment of the CEO.
[10] Therefore, any firm whose shareholding in AGS is 25% or more would possess negative control due to its ability to influence AGS policy by a veto vote on reserved matters.[3]
PROPOSED
TRANSACTION AND RATIONALE
[11] Stanlib IYF (represented by Stanlib GP 2) will acquire an additional 5.05% in AGS from the sellers, AGH and Izitsalo Employee Investments (Pty) Ltd (“Izitsalo”).[4] Post-merger, Stanlib IYF will have negative control over AGS through its 30% shareholding.
[12] Stanlib IYF submits that AGS aligns with its investment mandate and acquiring negative control over AGS provides Stanlib IYF with governance protection. AGS submits that a potential investor withdrew before the conclusion of a prior transaction. AGH and Izitsalo retained these shares, which were earmarked for future sale by a replacement buyer. Stanlib IYF elected to exercise its pre-emptive right to acquire additional shares in AGS.
RELEVANT
MARKET AND IMPACT ON COMPETITION
[13] The Competition Commission (“Commission”) assessed the activities of the merging parties and found no horizontal overlaps. This is because neither Standard Bank nor any of the firms that it controls are involved in the market for the provision of grain storage.
[14] The Commission found a pre-existing business relationship between Standard Bank and AGS, with Standard Bank providing financial
services to AGS as a corporate client. The Commission found that this relationship had no bearing on its assessment of the proposed
transaction as the financial services were far removed from Stanlib IYF.
[15] Due to the above, the Commission concluded that the proposed transaction was unlikely to substantially lessen or prevent competition in any market. We found no reason to disagree.
PUBLIC
INTEREST
[16] The Commission found that negative employment effects were unlikely as the merging parties gave an undertaking that no retrenchments
would occur as a result of the proposed transaction.
[17] The Commission noted Izitsalo’s intention to sell a portion of its shares to Stanlib IYF. As a result, the Commission assessed the proposed transaction’s effect on promoting a greater spread of ownership by historically disadvantaged persons and workers in firms in the market as per section 12A(3)(e) of the Competition Act.[5]
[18] The Commission found that the shares being sold by both AGH and Izitsalo to Stanlib IYF were, at all relevant times, held temporarily
until a buyer was found. The proposed transaction is in line with that arrangement.
[19] The Commission, therefore, found that the proposed transaction does not result in a substantially negative effect on the promotion of a greater spread of ownership by workers.
[20] The Commission found that the proposed transaction was unlikely to raise any other public interests concerns.
CONCLUSION
[21] In light of the above, we concluded that the proposed transaction was unlikely to substantially prevent or lessen competition in any relevant market. In addition, we are of the view that no public interest concerns arise from the proposed transaction.
[22] Accordingly, we approved the transaction without conditions.
30 April 2020
Date
____
Mr Enver Daniels
Mr A Wessels and Prof. I Valodia concurring
Tribunal Case Manager: P Kumbirai
For the Merging Parties: D Rudman and B Phillips of Webber Wentzel
For the Commission: R Darji
[1] Gauteng, Free State, KwaZulu-Natal, Limpopo, Mpumalanga & the Western Cape.
[2] AGS contracted with AFGRI Operations to manage its storage business.
[3] See Caxton and CTP Publishers and Printers v Media 24 (Pty) Ltd and others (136/CAC/March2015) paras 46-48.
[4] Izitsalo is an employee share scheme which is not controlled by AGH.
[5] No. 89 of 1998.
Case-aware research
Ask AI about this case
The judgment and available research above are public. New questions open in a separate private conversation grounded in this case.