Automated Summary
Key Facts
The Competition Tribunal of South Africa unconditionally approved the large merger between K2022451328 (South Africa) Proprietary Limited (K2022) and Preference Capital Proprietary Limited (PrefCap) on 4 October 2022. K2022, controlled by the Old Mutual Group, acquired a [redacted] interest in PrefCap, gaining control under section 12(2)(g) of the Competition Act, 1998. The merger aimed to expand market access to the SME sector and diversify revenue streams for the acquiring firm, while enabling PrefCap to leverage Old Mutual's distribution networks and transformation goals. The Competition Commission found no vertical overlap and concluded the transaction would not substantially lessen competition, as the merging parties operate in distinct sub-segments: Masisizane (Old Mutual's subsidiary) focuses on underdeveloped areas and black-owned SMEs, while PrefCap targets SMEs with R1 million turnover in urban areas. The merger also positively impacted ownership spread by introducing HDPs into PrefCap, with Old Mutual's B-BBEE certification at level 1. Employment representatives from both parties confirmed no adverse effects on employment, leading the Tribunal to approve the transaction without conditions.
Issues
- The Commission analyzed the spread of ownership, noting that the transaction introduces and increases HDP ownership in PrefCap. OML, part of the Old Mutual Group, has a Level 1 B-BBEE certification and a significant black economic interest. The tribunal concluded the merger positively contributes to HDP ownership promotion.
- The Competition Tribunal assessed whether the merger between K2022 and PrefCap would substantially prevent or lessen competition in the market for the provision of funding/lending services to businesses, particularly in the SME sub-market. The Commission found no vertical overlap and concluded that the transaction is unlikely to harm competition due to differences in target customers and market structure.
- The tribunal evaluated the merger's impact on employment, including staff retention and union concerns. Both merging parties confirmed no adverse effects on employment, with trade unions and employee representatives stating no objections. The Commission agreed the transaction is unlikely to negatively affect employment.
Holdings
- The Tribunal found the proposed transaction has no adverse effects on employment. Employee representatives from Old Mutual Group (IBSA, SASBO) and PrefCap confirmed no objections or concerns. K2022, a newly incorporated firm, has no employees, and the merger is expected to retain existing staff while potentially increasing employment through skilled previously disadvantaged individuals in the PrefCap Group.
- The Competition Commission assessed the transaction and determined that while there is some overlap in services to black-owned and SME customers, the merging parties are unlikely to be close competitors. The Old Mutual Group (through Masisizane) and PrefCap serve different market segments, with Masisizane targeting underdeveloped areas and black-owned SMEs, and PrefCap operating in a wider industry scope with higher turnover requirements. Market participants did not list the merging parties as significant players, and no third parties raised competition concerns.
- The Competition Tribunal unconditionally approved the large merger between K2022 and Preference Capital (PrefCap). The decision found no substantial prevention or lessening of competition in the relevant market for funding/lending services to businesses, as the merging parties operate in distinct sub-segments. Masisizane focuses on high-risk, black-owned SMEs in rural areas, while PrefCap targets a broader SME market with higher turnover requirements. The Tribunal also concluded the transaction raises no public interest concerns, including no adverse impact on employment and a positive effect on the spread of ownership by introducing HDPs/B-BBEE shareholding into PrefCap.
- The transaction positively impacts the spread of ownership by introducing HDPs/B-BBEE shareholding into PrefCap. The Old Mutual Group (via OML) has a Level 1 B-BBEE certification, with 28.79% black economic interest. An upcoming 'Bula Tsela' transaction is projected to increase this to over 30%, enhancing ownership diversity. PrefCap, previously without B-BBEE shareholders, will benefit from this alignment.
Remedies
On 4 October 2022, the Competition Tribunal unconditionally approved the large merger where K2022 intends to acquire a [redacted] interest in Preference Capital (Pty) Ltd (PrefCap). The Tribunal found the transaction is unlikely to substantially prevent or lessen competition in the relevant market and raised no public interest concerns.
Legal Principles
Other
Cited Statute
Competition Act, 1998
Judge Name
- Ms A Ndoni
- Professor F Tregenna
- Sha'ista Goga
Passage Text
- [34] We agree with the Commission's findings that the proposed transaction does not raise concerns relating to the promotion of a greater spread of ownership by HDPs and in fact leads to a greater spread of HDP shareholdings in the market.
- [35] For the above reasons, we find that the proposed transaction is unlikely to result in a substantially prevent or lessen competition in the relevant market. Furthermore, the proposed transaction raises no public interest concerns. Therefore, the Tribunal approved the proposed transaction without conditions.
- [22] Based on the above, we find that the proposed transaction is unlikely to substantially prevent or lessen competition in the relevant market.