Life Healthcare (Pty) Ltd / Joint Medical Holdings
Acting for Life Healthcare Group (LHG) in its acquisition of further shares in Joint Medical Holdings (JMH). LHG is a listed private hospital group and one of the three largest hospital groups in South Africa. JMH owns and operates five private hospitals in the Durban city centre and surrounding areas. The parties' activities overlap in providing private healthcare services in the greater Durban area. Prior to the merger, Life Healthcare held 49% of the share capital of JMH. In terms of the proposed transaction, Life Healthcare made a public offer to the other JMH shareholders (comprising some 300 private doctors, their families and trusts) to acquire an additional 21% of JMH's shares. The merger would increase Life Healthcare's interest in JMH to 70%.
The merger was notified to the Commission in August 2011. Following an extensive six-month investigation, the Competition Commission (Commission) recommended to the Competition Tribunal (Tribunal) that the merger be prohibited. The Commission argued that the merger would result in a lessening of competition, and that it would, in particular result in higher prices for uninsured patients and notional regional medical schemes operating in the Durban area; reduce other independent hospitals' ability to be included in designated service provider (DSP) networks established by medical schemes; and reduce the ability of independent hospitals in the Durban area to compete for medical specialists.
LHG and JMH opposed the Commission in the hearing before the Tribunal during May and June 2012. This involved extensive pre-trial procedures. Following the completion of the hearing, the Tribunal informed the parties that it wished to take the very unusual step of appointing its own expert to consider and advise it on certain economic analyses conducted by the expert economists during the hearing. This, in turn, prompted the Commission to apply to the Tribunal to admit further new evidence into the record of evidence. The merging parties resisted both the appointment of the Tribunal's expert and the Commission's application to admit new evidence.
On 24 July 2012 the Tribunal issued its order approving the merger without any conditions.
This matter highlights the current challenges and extensive litigation procedures that parties face in opposed merger proceedings before the South African competition authorities. Notably, it took nearly a year from the date the Commission was notified of the proposed merger for the matter to be considered by the Tribunal and ultimately approved.
Marley Pipe Systems (Pty) Ltd
The matter involved the acquisition by Marley Pipe Systems (Pty) Ltd (Marley) of the assets of Petzetakis Africa (Pty) Ltd (Petzetakis) from the liquidator of Petzetakis. Petzetakis was a failed firm, but its shareholders vigorously opposed the transaction, first disputing that the transaction was a merger and then raising prior implementation issues. There were significant potential overlaps and therefore complex competition issues, as well as employment issues. In addition, the parties were subject to cartel investigation
Oceana Group Ltd
The matter involved two related but separate and divisible transactions. The first and principal transaction involved the acquisition by Oceana Group Limited (Oceana) of fishing businesses, interests, shares and assets from Bato Star Fishing (Proprietary) Limited (Bato Star), Phambili Fishing (Proprietary) Limited (Phambili) and from a number of companies within the African Marine Products (Proprietary) Limited group (AMP). The second transaction involved the sale of the cold storage business of V&A Cold Store (Proprietary) Limited (V&A), a company within the AMP group, to Commercial Cold Storage (Proprietary) Limited, an Oceana subsidiary.
The main transaction comprised the sale of multiple businesses, assets, shares and fishing interests across the hake, sole, south coast rock lobster and horse mackerel fishing industries. This gave rise to significant complexity as the dynamics of each fishing sector had to be assessed in order to gauge the impact of the transaction on competition. Additional complexity in the transaction was due to the fact that the transfer of fishing rights is subject to approval from the Department of Agriculture Fishing and Forestry, which shares concurrent jurisdiction with the competition authorities. Added caution was required in the handling of the matter as the fishing industry, and Oceana in particular, had come under close scrutiny by the competition authorities following the Competition Commission's (Commission) recent prohibited practices investigation into the pelagic fishing industry.
The Commission's major concerns regarding employment and the rights of third parties to negotiate contracts for the catching of their fishing quotas post-merger were dealt with in the conditions imposed on the transaction. The conditions have been accepted by the merging parties.
The cold storage transaction involved the sale of V&A's cold storage facilities which are located at the Cape Town quayside. The cold storage acquisition amounted to a small transaction and did not require approval, but was nonetheless notified as the parties anticipated that the Commission would require notification given the nature of the transaction. In its assessment of the competitive effects, the Commission adopted a narrow construction of the market which led it to conclude that the merged entity would be dominant and accordingly imposed behavioural conditions to address these concerns. The parties, however, contend that the market was not properly defined and are seeking to challenge the conditions imposed.
Paarl Media / Primedia@Home
This transaction involves Paarl Media, a subsidiary of the global Naspers / MIH / Media24 group of print, publishing and electronic media companies, purchasing the failing advertising leaflet distribution ("knock-and-drop") business of Primedia. Paarl Media has printing operations throughout South Africa and launched an advertising jacket to compete with Caxton's dominance in publishing, printing and distributing community newspapers throughout South Africa.
The acquisition was a small merger and did not require approval from the Competition Commission. However, the merging parties anticipated a complaint from Caxton and voluntarily notified the transaction. After an exhaustive investigation involving independent economists appointed by the parties the Commission approved the merger. The parties then implemented the merger.
Caxton subsequently applied to the Competition Tribunal to interdict, review and set aside the Commission's decision. The Tribunal did not grant the interdict but did remit the matter to the Commission to be investigated by a new team, after finding deficiencies in the initial investigation. The Commission prohibited the merger following its second investigation.
The merging parties then applied to the Tribunal to consider the Commission's second decision and approve the transaction. Caxton applied to intervene in these proceedings and was granted limited access by the Tribunal.
In April 2012 Paarl Media assessed the financial viability of the merged business and considered closing it. Paarl Media sought guidance from the Commission in the face of the prohibition following the second investigation. The Commission declined to express a view. Caxton then urgently applied to the Tribunal to interdict Paarl Media closing the merged business. The Tribunal did not grant Caxton the relief it sought and merely ordered that an independent trustee be appointed to take an inventory of the merged business and identify possible purchasers of the business or its assets. The trustee was also mandated to monitor Paarl Media's compliance with various undertakings it had volunteered to the Tribunal.
Paarl Media and Caxton are the two leading printers and publishers in South Africa. Caxton is renowned for objecting in merger proceedings against its competitors, particularly involving Paarl Media and other companies in the Naspers group. Although a seemingly insignificant transaction, Caxton's challenges raised complex legal and economic questions. These included questions of market definition (particular the role of supply side substitutability); public interest issues arising but not considered by the Commission (failing firm and job losses); and the further investigation and prohibition of a lawfully implemented merger.
Stefanutti Stocks Ltd
Webber Wentzel acted for Stefanutti in the construction cartel investigation by the Competition Commission. This is the largest cartel investigation initiated by the Commission to date. The investigation has its genesis in concerns raised around potential bid rigging in relation to the building of the world cup football stadia. The investigation however extended to all unlawful behaviour from September 2006 to date. We assisted by auditing the business, implementing a compliance and dawn raid program, filing numerous leniency applications and engaging with the Competition authorities and other affected government agencies.
Sumitomo Mitsui Financial Group
The matter involved the acquisition by Sumitomo Mitsui Financial Group through its principal operating subsidiary Sumitomo Mitsui Banking Corporation from The Royal Bank of Scotland plc of 100% of the issued share capital of the following three currently wholly-owned subsidiaries of The Royal Bank of Scotland Group: (i) RBS Aerospace Limited; (ii) RBS Aerospace (UK) Limited; and (iii) RBS Australia Leasing Pty Limited, which are engaged in the business of commercial aircraft leasing globally and which (together with their respective subsidiary undertakings) form RBS Aviation Capital.
The deal is one of the largest acquisitions ever by a Japanese company of a foreign target, and the largest-ever transaction in the aircraft-leasing sector, according to The Wall Street Journal and gave rise to horizontal overlaps both in South Africa and globally.
Webber Wentzel is responsible for the South African merger filing (including drafting the notification and engaging with the South African competition authorities).
Unilever plc, Unilever N.V. and Unilever South Africa (Pty) Ltd
Webber Wentzel acted for Unilever in respect of the South African competition merger notification regarding -
Unilever's disposal of the Status deodorant brand to Tiger Brands Limited in South Africa
Unilever's disposal of the Sanex brand worldwide to Colgate-Palmolive
The matter raised a number of complex issues around compliance with divestiture conditions by two separate competition authorities.
UTI South Africa (Pty) Ltd
The matter involved an investigation into alleged cartel behaviour in relation to the imposition of, inter alia, fuel and security surcharges by the freight forwarding industry. Webber Wentzel engaged extensively with the Competition authorities over a period of 2 years and ultimately persuaded the authorities not to refer its complaint against UTI to the Tribunal for adjudication. The result is particularly significant given that a number of other freight forwarding companies such as Kuehne & Nagel AG and Schenker AG were unsuccessful and have since paid substantial penalties.
Wal-Mart Stores Inc / Massmart
The matter involved the acquisition by Wal-Mart Stores Inc. of a controlling interest in South African wholesaler and retailer, Massmart Holdings Limited. In the last 12 months Webber Wentzel represented Wal-Mart in proceedings before South Africa's Competition Tribunal (Tribunal) and in an appeal and review application against the Competition Tribunal's decision to South Africa's Competition Appeal Court (CAC). During this period Webber Wentzel also advised on aspects of proceedings in Namibia.
This acquisition was Wal-Mart's largest foreign acquisition since its acquisition of ASDA in the UK in 1999 and one of the largest investments by a US corporation into Africa to date.
In South Africa, the acquisition was formally opposed before the Tribunal by a number of trade unions and government departments.
The matter raised important questions around the role of public interest considerations in South Africa's merger control regime.