2 December 2015 by Cliffe Dekker Hofmeyr Competition Matters

Commission conditionally approves large merger between black-owned investment firms

The Competition Tribunal’s conditional approval of the merger between Pembani Group Proprietary Limited (Pembani) and various firms controlled by Shanduka Group Proprietary Limited (Shanduka) has created one of the largest black-controlled investment groups in South Africa.

Pembani is jointly controlled by Old Mutual Life Assurance Company South Africa and Mr Phutuma Nthleko, MTN’s former CEO. Its primary investment focus is oil, gas and resources. Shanduka’s portfolio included investments in listed and unlisted firms in the following industries: resources, financial services, energy, telecommunications, beverages and food.

Notwithstanding the complexity and scope of the transaction, the only overlap identified by the Commission was in the coal industry, where Pembani, in addition to acquiring Shanduka’s interests, already held a minority interest in one of Shanduka’s competitors, BHP Billiton Energy Coal South Africa (BECSA). Given the low market shares of the parties, the competition authorities found that the small increase in market concentration did not raise competition concerns.

Of greater concern was the potential for the exchange of information between competitors resulting from Pembani’s minority interest in BECSA, which gives it the right to appoint a director to BECSA’s board, and its acquisition of Shanduka’s coal firms.

To address this concern, the parties agreed that a person elected to sit on the board of BECSA would not at the same time, or during the year preceding his election, be:

  • a director on the board of any of the Shanduka coal firms;
  • an employee of Pembani working in a coal marketing position; or
  • an employee of the Shanduka coal firms occupying a coal marketing position.

Moreover, the parties agreed that a former BECSA director elected by Pembani may not serve as a director of the Shanduka coal firms, or be employed in a coal marketing position, within a year after serving as a BECSA director.

 

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