Sun International (South Africa) Ltd v Sunwest International Ltd and Worcester Casino (Pty) Ltd (60/LM/Jul11) [2011] ZACT 79 (6 October 2011)
- Citation
- [2011] ZACT 79
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- 60/LM/Jul11
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Medi Mokuena, Andiswa Ndoni
- Case number
- 60/LM/Jul11
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger, which shifts control from joint to sole control in two Western Cape casinos, does not alter the market structure or the incentives of the parties to behave anti-competitively. Sun International was already the dominant partner and exercised management control over pricing and competitiveness. The geographic market is limited to the Western Cape, where each casino operates as a regional monopoly. The transaction does not introduce new competitive constraints or public interest concerns. Accordingly, the merger is unlikely to substantially prevent or lessen competition and is approved unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed transaction is approved without conditions.
02
Material facts
Parties
Sun International (South Africa) Limited
Applicant Counsel: Edward Nathan SonnenbergsSunwest International Ltd
RespondentWorcester Casino (Pty) Ltd
RespondentAmounts and remedies
- Percentage Shareholding Acquired in Sunwest: 0.12
- Percentage Shareholding Acquired in Worcester: 20.3
- Post Merger Shareholding in Sunwest: 50.09
- Post Merger Shareholding in Worcester: 69.7
03
Procedural history
Posture
Merger Application / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger from joint to sole control will substantially prevent or lessen competition in the relevant market.
- 02
Whether the transaction raises any public interest concerns.
Party arguments
- Applicant
- Sun International argued that acquiring sole control over Sunwest and Worcester would not alter the competitive dynamics in the Western Cape casino market, as it already exercised dominant management control and the market structure would remain unchanged. The applicant submitted that significant minority protection rights for Grand Parade Investments Ltd would persist, ensuring continued joint control in practice.
- Respondent
- The Competition Commission contended that the merger would not change the incentive or ability of the parties to act anti-competitively, as each casino already held a regional monopoly and the transaction did not alter market structure or competitive constraints. The Commission found no public interest issues and recommended unconditional approval.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger that does not alter market structure or competitive incentives is unlikely to substantially prevent or lessen competition.
- 02
Tribunal hearing transcript, comments by Antony Leeming, page 9
The existence of regional monopolies and unchanged market positions pre- and post-merger indicates no increase in anti-competitive risk.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger, which shifts control from joint to sole control in two Western Cape casinos, does not alter the market structure or the incentives of the parties to behave anti-competitively. Sun International was already the dominant partner and exercised management control over pricing and competitiveness. The geographic market is limited to the Western Cape, where each casino operates as a regional monopoly. The transaction does not introduce new competitive constraints or public interest concerns. Accordingly, the merger is unlikely to substantially prevent or lessen competition and is approved unconditionally.
Obiter and limits
- The Tribunal noted that the distance between Grand West and Worcester Casinos makes it unlikely for them to compete directly within the same geographic market.
- The merging parties will continue to be jointly controlled in practice due to significant minority protection rights held by Grand Parade Investments Ltd.
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: 60/LM/Jul11
In the matter between:
Sun International (South Africa) Limited …......................................................Acquiring Firm
And
Sunwest International Ltd and Worcester Casino (Pty) Ltd ….............................Target Firm
Panel : Norman Manoim (Presiding Member)
Medi Mokuena (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 21/09/2011
Order issued on : 21/09/2011
Reasons issued on : 06/10/2011
Reasons for Decision
APPROVAL
On 21 September 2011 the Competition Tribunal (“Tribunal”) unconditionally approved the proposed transaction involving Sun International and Sunwest International and Worcester Casino. The reasons for approval of the proposed transaction follows below.
THE
TRANSACTION AND RATIONALE
The proposed merger impacts on the casino gaming, leisure, hotel and resorts market. The primary acquiring firm is Sun International
(South Africa) Limited (“SISA”) which is controlled by Sun International Ltd (“SIL”). Its activities include the investment, management and operation of casinos, casino resorts and hotels in South Africa and around the world. The target firms are Sunwest International (Proprietary) Limited (“Sunwest”) and Worcester Casino (Proprietary) Limited (“Worcester”). Both firms are active in the casino gaming, leisure, hotel and resort market within the Western Cape.
In terms of the proposed transaction, SISA intends to increase its existing shareholding in the target firms by acquiring 0.12% of the issued share capital of Sunwest and 20.3% of the issued share capital of Worcester. Premerger, SISA holds 49.97% interest in Sunwest which will increase to 50.09% post merger, and 49.4% in Worcester which will increase to 69.7% post merger. As a result of the merger, SISA will have sole control over the target firms.
The remainder of the shareholding in the target firms is held by Grand Parade Investments Ltd (“GPI”). Post merger, as much as SISA will acquire sole control of the target firms, the merging parties submitted that the target firms will continue to be jointly controlled by both SISA and GPI due to significant minority protection rights granted to GPI.
COMPETITION
ASSESSMENT
There is a horizontal overlap in the activities of the merging parties in that they both operate casinos which form part of the broader leisure and entertainment complex containing theatres, conference facilities, hotels, cinemas and restaurants. The target firms are situated in the Western Cape, and the acquiring group’s interests in the Western Cape comprise only its existing controlling (albeit joint) shareholding in each of the target firms ( i.e. Grand West Casino and the Worcester Casino). The geographic market is therefore narrowed to the Western Cape region.
The Commission found that the distance between Grand West and Worcester Casinos is about 88 kilometres, thus making it unlikely for these casinos to exert competitive constraint on each other, and unlikely for them to be in the same geographic market.
The Commission in its assessment also found that each casino has a regional monopoly and that the incentive and ability for these
casinos to price at the maximum level and yield monopoly profits already exists pre-merger. The proposed transaction thus does not change the incentive of the merging parties to behave anti-competitively, as it does not change the structure of the market in view of the fact that all market players will continue to hold the same market position as they did pre-merger.
PUBLIC
INTEREST
There are no public interest issues.
CONCLUSION
The merger brings about a change from joint control to sole control in two Cape based casinos. The movement from joint to sole control is unlikely to have any change in the pre-merger incentives of the underlying businesses as:
SISA was the dominant partner pre-merger given that it is a casino operator and the seller is not;
SISA enjoyed management control of those aspects of the business that would affect the pricing and competitiveness of the offerings;1 and
The merger does not result in in any change in the market structure.
The proposed transaction is therefore unlikely to substantially prevent or lessen competition in the identified relevant market, and is approved without conditions.
____ 06/10/2011
N Manoim Date
M Mokuena and A Ndoni concurring
Tribunal Researcher: Londiwe Senona
For the merging parties: Edward Nathan Sonnenbergs
For the Commission: Seema Nunkoo
1See comments made at the hearing by Antony Leeming from Sun International, transcript page 9.
3
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.