27 May 2015 by Cliffe Dekker Hofmeyr

Tribunal reconsiders acquisition by Hosken of Gallagher Convention Centre

On 22 December 2014, the Competition Commission prohibited the intermediate merger in terms of which Hosken Consolidated Investments Limited (HCI) intended to acquire Atterbell Proprietary Limited t/a Gallagher Convention Centre (GCC).

The Commission prohibited the merger on the basis that it would result in a substantial lessening or prevention of competition in the market for the provision of exhibition venues and exhibition facilities in Johannesburg. HCI holds an interest in Tsogo Sun Holdings Limited which operates various conferencing and exhibition facilities in, among other geographical areas, Johannesburg and, in particular, the Sandton Convention Centre (SCC). In addition, HCI owns the immovable property on which the Gallagher Convention Centre is situated. GCC, on the other hand controls the business of the Gallagher Convention Centre (the actual conferencing and exhibition facility). The acquisition would result in HCI also obtaining control over the business of the Gallagher Convention Centre. The Commission was not concerned that the transaction would lead to any lessening or prevention of competition in the national market for conferencing venues and facilities (for big conferences with more than 500 delegates).

The merging parties subsequently brought an application to the Tribunal to reconsider the Commission's decision to prohibit the proposed transaction. The merging parties argued that the proposed transaction would not lessen or prevent competition and, in addition, submitted that the merger was justified on public interest grounds as it would have a positive effect on employment.

The hearing of the application was, however, stood down to award the merging parties and the Commission an opportunity to discuss possible conditions to remedy the Commission's concerns with the transaction. The application was ultimately not heard as appropriate conditions were agreed upon by the parties and the Tribunal confirmed these conditions.

In summary, it was agreed that:

(i)   the businesses of SCC and GCC will be kept separate and will not be integrated, which included implementation of measures to prevent the flow of competitively sensitive information between SCC and GCC;

(ii)  GCC would not increase prices to exhibition customers by more than CPI per annum for a period of at least 4 years;

(iii)HCI ensures the continuance of the GCC business for at least 4 years; and

(iv)despite claims by the merging parties that the transaction would be beneficial to employment, HCI will maintain employment levels of the GCC business, preserving the employment of all permanent employees or, in the event of the business closing down, provide training or find alternative employment for permanent employees.

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