Sun International (South Africa) Limited and Real Africa Holdings Limited (41/LM/May06) [2006] ZACT 70 (17 August 2006)
- Citation
- [2006] ZACT 70
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 41/LM/Apr06
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 41/LM/Apr06
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the merger merely results in the transfer of minority shareholdings from Real Africa to Sun International in subsidiaries where Sun International already exercises control. Post-merger, Sun International will acquire sole positive control over Afrisun KZN, Emfuleni Resorts, and Sunwest International, but this does not result in any aggregation of market share or increased concentration. The transaction does not raise any public interest concerns, as Real Africa's non-gaming interests will be disposed of after completion. The Tribunal agreed with the Commission that the merger is unlikely to substantially prevent or lessen competition in any market where the parties are active. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The merger between Sun International (South Africa) Limited and Real Africa Holdings Limited is approved unconditionally.
02
Material facts
Parties
Sun International (South Africa) Limited
Applicant Counsel: A CockrellReal Africa Holdings Limited
Respondent Counsel: H Irvine03
Procedural history
Posture
Merger Application / Approval
04
Questions and positions
Legal issues
- 01
Does the proposed merger result in a substantial prevention or lessening of competition in any relevant market?
- 02
Will the transaction lead to an aggregation of market share or increased concentration in South Africa?
- 03
Are there any public interest concerns arising from the merger?
Party arguments
- Applicant
- Sun International argued that the transaction involves acquiring Real Africa's minority interests in subsidiaries where Sun International already exercises control. The merger will create a single listed point of entry into the group and increase exposure to core gaming, hotel, and resort activities. The applicant contended that the transaction would not alter competitive dynamics or market concentration, as Sun International already holds controlling interests in the relevant subsidiaries.
- Respondent
- Real Africa Holdings did not oppose the merger and indicated its intention to dispose of non-core, non-gaming interests after the transaction. The respondent supported the view that the transaction would not substantially affect competition or public interest in the relevant markets.
05
Court’s reasoning
Legal principles
- 01
Competition Act 89 of 1998
A merger will not be prohibited if it is unlikely to substantially prevent or lessen competition in any relevant market.
- 02
Commission's record, pages 55-56
The assessment of control includes both voting rights and management responsibility, as well as negative control through minority protections.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the merger merely results in the transfer of minority shareholdings from Real Africa to Sun International in subsidiaries where Sun International already exercises control. Post-merger, Sun International will acquire sole positive control over Afrisun KZN, Emfuleni Resorts, and Sunwest International, but this does not result in any aggregation of market share or increased concentration. The transaction does not raise any public interest concerns, as Real Africa's non-gaming interests will be disposed of after completion. The Tribunal agreed with the Commission that the merger is unlikely to substantially prevent or lessen competition in any market where the parties are active. Accordingly, the merger was approved without conditions.
Obiter and limits
- The Tribunal noted that Real Africa's non-gaming interests are to be disposed of post-transaction, further reducing any potential competitive overlap.
- No public interest issues were identified in the assessment of this merger.
Court disposition
Merger approved without conditions.
- The merger between Sun International (South Africa) Limited and Real Africa Holdings Limited is approved unconditionally.
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: 41/LM/Apr06
In the matter between:
Sun International (South Africa) Limited Acquiring Firm
And
Real Africa Holdings Limited
Target Firm
Panel: D Lewis (Presiding Member), N Manoim (Tribunal
Member) and Y Carrim (Tribunal Member)
Heard on: 24 July 2006
Order issued on: 24 July 2006
Reasons issued on: 17 August 2006
Reasons for Decision
APPROVAL
On 24 July 2006, the Tribunal approved the merger between Sun International (South Africa) Limited and Real Africa Holdings Limited. The reasons for approval follow.
THE
TRANSACTION
The acquiring firm is Sun International (South Africa) Limited (âSun Internationalâ). Sun International is controlled by Sun International Limited, a company listed on the JSE and is part of the Sun International Group. The Sun International Group holds interests in the leisure, resort and casino industries. It owns and operates hotels, resorts and casinos throughout South Africa and internationally.
The target firm is Real Africa Holdings (âReal Africaâ), an investment holding company listed on the JSE.1 Real Africa has a diverse portfolio of investments. Through its 66.2% interest in Afrisun Leisure Investments (Pty) Ltd, Real Africa holds shares in several subsidiaries of the Sun International Group (viz. its casino operating and casino management companies).2 Real Africaâs current interests in these subsidiaries is tabulated below:
Sun International Group subsidiary
Real Africa
Economic Interest
Voting share Capital
Casino Operation
Afrisun Gauteng
21 %
25 %
Afrisun
KZN
11.5 %
15 %
Emfuleni Resorts
2.3 %
15 %
Sunwest International
14.1 %
17 %
Casino Management
National Casino Resort Manco
21.8 %
33 %
Gauteng Casino Resort Manco
30 %
30 %
In terms of the proposed transaction, Sun International intends acquiring the entire issued share capital of Real Africa. The mechanism for the acquisition comprises an offer to all the shareholders in terms of section 440 of the Companies Act 61 of 1973. The effect of the transaction is that Sun International will acquire Real Africaâs minority stake in all of the subsidiaries of the Sun International Group where Real Africa has a share. As a result, Real Africa will cease to be a shareholder in these subsidiaries.
By acquiring Real Africaâs minority interests in its operations, the Sun International Group seeks to create a single listed point of entry into the group whilst simultaneously increasing the groupâs exposure to its own existing core gaming, hotel and resort activities.3
IMPACT
ON COMPETITION
The only overlap in the partiesâ activities lies in the minority shareholdings, which Real Africa holds in the six Sun International Group subsidiary companies, which minority shares will be acquired through this transaction. According to the Commission, the
transaction simply results in a transfer of additional shares to the Sun International group of certain of its subsidiaries, over which it already exercises some measure of control. The form of control which the group currently exercises over the relevant subsidiaries is shown below:
Subsidiary
Current Interest (shareholding)
Form of Control currently exercised by the Sun International Group
Afrisun Gauteng
60% voting share capital and 70% effective economic interest
Sole control
Afrisun
KZN
44% voting share capital and 56.1% effective economic interest
Management responsibility + Negative control by virtue of minority protections
Emfuleni Resorts
49% voting share capital and 70.2% effective economic interest
Management responsibility + Negative control by virtue of minority protections
Sunwest International
49% voting share capital and 58.8% effective economic interest
Management responsibility + Negative control by virtue of minority protections
National Casino Resort Manco
Sun International Limited holds 60% voting capital of National Casino Resort Manco Holdings which holds 50% of National Manco Casino Resort Manco
Voting control
Gauteng Casino Resort Manco
Sun International Limited holds 60% voting capital of National Casino Resort Manco Holdings which holds 50% of Gauteng Casino Resort Manco
Voting control
From the above, it is clear that post merger, the Sun International Group will not acquire any additional control over Afrisun Gauteng, National Casino Resort Manco and Gauteng Casino Resort Manco. It will acquire sole positive control over each of Afrisun KZN, Emfuleni Resorts and Sunwest International as it will be able to vote the majority of votes that may be cast at general meetings of these companies. In light of this, we agree that the acquisition does not result in any aggregation of market share or increased concentration in South Africa.
Subsidiary Current Interest (shareholding) Form of Control currently exercised by the Sun International Group Afrisun Gauteng 60% voting share capital and 70% effective economic interest Sole control Afrisun KZN 44% voting share capital and 56.1% effective economic interest Management responsibility + Negative control by virtue of minority protections Emfuleni Resorts 49% voting share capital and 70.2% effective economic interest Management responsibility + Negative control by virtue of minority protections Sunwest International 49% voting share capital and 58.8% effective economic interest Management responsibility + Negative control by virtue of minority protections National Casino Resort Manco Sun International Limited holds 60% voting capital of National Casino Resort Manco Holdings which holds 50% of National Manco Casino Resort Manco Voting control Gauteng Casino Resort Manco Sun International Limited holds 60% voting capital of National Casino Resort Manco Holdings which holds 50% of Gauteng Casino Resort Manco Voting control
Furthermore, with regard to Real Africaâs non-gaming interests, the Sun International Group has indicated that it is its intention to dispose of all these non-core interests after completion of the proposed transaction.
CONCLUSION
Based on the above, we agree with the Commission that the transaction is unlikely to substantially prevent or lessen competition in any of the markets that the merging parties are active in. There are no public interest issues and we accordingly approve this transaction without conditions.
D Lewis
Y Carrim and N Manoim concurring
Tribunal Researcher: M Murugan-Modise
For the merging parties: Advocate A Cockrell instructed by Edward Nathan for Sun
International (South Africa) Limited and H Irvine (Deneys
Reitz) for Real Africa Holdings Limited
For the Commission: M Mohlala and G Mudzanani (Mergers and Acquisitions)
1 Real Africaâs major shareholders are Coronation Capital Ltd (17.92%), Engineering Industrial Pension Fund (6.28%), Merrill Lynch International (5.75%) and Momentum Group Ltd (5.14%).
2 Real Africa also has interests in information technology companies, fishing, cold storage and auxiliary services and healthcare. A list of these subsidiaries can be found on page 481-482 of the Commissionâs record.
3 For more detail regarding the rationale for the transaction see pages 55-56 of the Commissionâs record.
4
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