Statement on Competition Commission Meeting of 4 November 2014 To: All Media Date: 06 November 2014 1. Key decisions on mergers and acquisitions 1.1 Approved mergers Metropolitan Health Corporate Proprietary Limited (MH) and CareCross Health Proprietary Limited The Commission has recommended to the Competition Tribunal the approval of a large merger between Metropolitan Health and CareCross Health and two of CareCross’ subsidiaries, namely, Workerscare and Onecare. In addition Metropolitan Health will acquire a 51% stake in Occupational Care South Africa and a 20% stake in Nu care. Metropolitan Health provides closed and open media scheme administration services, including administration and management of membership applications and administration of claims by scheme beneficiaries. Care Cross and Onecare provide managed healthcare services to medical schemes who offer the CareCross option to its beneficiaries. Managed care services include among others; pathology and radiology services, afterhours and emergency visits, optometry and dental benefits for medical scheme clients. Workerscare is a wholly-owned subsidiary of CareCross that is used to market its products. Post-merger, Metropolitan Health will have sole control over CareCross, Workers care and Onecare. The Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition in any of the relevant markets, and did not raise public interest concerns. Mergence Africa Property Investment Trust and Redefine Properties Limited in respect of a portfolio of 6 property letting enterprises The Commission has approved the intermediate merger between Mergence and property letting enterprises of Redefine Properties. The properties comprise of 6 retail centres of which 4 are classified as convenience centres and the remaining 2 are classified as neighbourhood centres. These properties are located in suburbs within Soweto and in Hammanskraal. In terms of the proposed transaction, Mergence will have sole control over the properties The Commission found that the proposed merger is unlikely to substantially prevent or lessen competition in the market for the provision of rental space in convenience centres, and does not raise public interest concerns. The Commission identified a concern in the existence of exclusivity clauses in Lease Agreements of 5 of the Target Properties, namely Meadowpoint Shopping Centre, Proteapoint Shopping Centre, Dopsonpoint Shopping Centre, Pimville Square Shopping Centre and Kubube Shopping Centre. The Lease Agreements are between Redefine and the respective anchor tenants, namely, Shoprite and PnP. The Commission is of the view that the exclusivity clauses have the effect of precluding small businesses and competitors of the anchor tenants, as it is unlikely that the anchor tenants will give permission to lease space to its competitors. In order to alleviate the concerns, the Commission approves the proposed transaction subject to the condition that the merging parties undertake to use reasonable commercial endeavours to negotiate with their anchor tenants, in utmost good faith within sixty (60) days of the Commission’s decision, to remove the exclusivity clauses contained in the respective Lease Agreements. Approval of the proposed purchaser of the Arkema Resins business in the Ferro/ Arkema Resins merger The Commission Meeting has approved Atlin Chemicals as the purchaser of the Arkema Resins (Pty) Ltd business as envisaged by the Conditions imposed by the Competition Tribunal in its order upon approval of this merger. On 4 August 2014, the Tribunal approved the Ferro/ Arkema Resins merger subject to a certain divestiture condition. After evaluating the information submitted, the Commission is satisfied that Atlin meets the criteria specified in the Tribunal order for a suitable purchaser of the divested Arkema Resins Business. The Commission recommended that Atlin be approved as the purchaser of the Business subject to Ferro filing a statement of accuracy under oath as provided in the Conditions. In terms of the conditions, and once the sale agreement has been concluded between the parties, the transaction must be notified to the Commission. Proposed merger between Second Chapter Investments Proprietary Limited and Lodestone Brands Proprietary Limited Commission has approved the intermediate merger between Second Chapter Investments (SCI) and Lodestone Brands (Pty) Ltd. SCI does not control any firm, however, it holds a 21,10% non-controlling interest in Lodestone. Lodestone is active in the categories of confectionery, specifically sugar confectionery, non-alcoholic beverages and baby care. The Commission considered the activities of the merging parties and found that the acquiring group does not have investments in firms that are active in the categories of confectionery, specifically sugar confectionery, non-alcoholic beverages and baby care. The Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition, as there is no overlap in the activities of the merging entities, and does not raise any public interest concerns. Proposed merger between Devoscope, Devowize and Pilovert and Mediclinic Kathu Hospital, Ferro-Chem Pharmacy and immovable Property Erf 1427 Kathu The Commission has approved a small merger involving three “Acquiring Firms,” namely, Devoscope (Pty) Ltd (Devoscope), Devowize (Pty) Ltd (Devowize) and Pilovert (Pty) Ltd (Pilovert). The “Target Firms” comprise of a private hospital business operating as Mediclinic Kathu Hospital (Kathu Hospital), a pharmacy business operating as Ferro-Chem Pharmacy (Ferro Pharmacy) and an immovable property (Target Property) on which the Kathu Hospital and the Ferro Pharmacy operate. The Target Firms comprises of a hospital business that provides healthcare services, a pharmacy that provides pharmaceutical retail services and the property in which the hospital and pharmacy are situated. The Acquiring Group comprises of firms that own a vacant land (zoned for residential property), office property, a golf estate, a commercial development land, a farm and mining operations. There is no overlap in the activities of the merging parties, as the Acquiring Group does not provide services which are substitutable to those provided by the Target Firms. The Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition, as there is no product overlap in the activities of the merging parties, and does not raise any public interest concerns. Proposed intermediate merger between Ntinga Investment Trust and Calulo Investments Proprietary Limited The proposed transaction is divided into two legs. Leg one: In terms of the Share Buy-Back Agreement, 376 (25.75%) ordinary shares held by Investec in Calulo will be bought back by Calulo. This means Investec will not hold any interest in Calulo. Post the Share Buy-back, Calulo will be jointly controlled by the Ntinga Trust, Riverdeep, the Nozala Trust and Ibunti. Leg two: In terms of the Re-allocation of Shares Agreement, the Ntinga Trust intends to increase its shareholding in Calulo from 47.67% to 64.21% and as such, the Ntinga Trust will own more than half of the issued share capital in Calulo. Post implementation of the proposed transaction, the Ntinga Trust by virtue of majority shareholding will control Calulo. The Commission considered the activities of the merging parties and found that there is a horizontal overlap insofar as the Ntinga Trust had joint control in Calulo pre-merger. However, this overlap does not change the structure of any market as there will be no accretion in market share. Therefore, the Commission is of the view that the proposed transaction is unlikely to substantially prevent or lessen competition in any market, and does not raise any public interest concerns. 1.2 Termination of conditions The Commission has considered and approved the following cases for termination of conditions: Merger between Clover Juice S.A. (Pty) Ltd and Real Juice Company Holdings (Pty) In approving the merger between the parties, the Commission had earlier imposed conditions on public interest issues. Upon examining the information subsequently received from the parties regarding compliance to these conditions, the Commission is satisfied that the merged entity has complied with the conditions in that no retrenchments occurred as a result of the merger and the distribution agreements with the Independent Distributors were extended. Merger between SCAW SA (Pty) Ltd and Ozz Industries (Pty) Ltd In approving the merger between the parties, the Commission had earlier imposed a condition that the merging parties should not increase their prices of grinding media (high chrome or standard grinding cylpebs or eclipsoids products) in a disproportionate manner and required Scaw to use the actual ferrochrome, ferromanganese and ferrosilicon price adjustments received from their suppliers in its calculation of its pricing. Upon examining the information subsequently received from the merging parties regarding compliance with that condition, the Commission is satisfied that the merged entity has complied with the condition. Termination of conditions imposed in the merger between Eveready (pty) ltd and House of York The meeting noted the compliance with the conditions imposed in the merger of Eveready (Pty) Ltd and House of York (Pty) Ltd. The purpose of the conditions was to ensure that the merged entity provided a training fund for the affected employees to ameliorate the harm suffered by the affected employees, through training and skilling them. The reports submitted by the merging parties and the Commission’s engagement with CEPPWAWU and the merging parties indicate that the affected employees who were interested in being trained were afforded the necessary funding by the merging parties and in fact proceeded to procure the training. Upon examining the information subsequently received from the merging parties, the Commission is satisfied that the merged entity has complied with the conditions. 2. New complaints Philip Mabona Enterprises vs. Properties Growthpoint and Matthew McCormick The Commission has received a complaint from an advertising company based in the East Rand (Ekurhuleni). The complainant buys exhibition space within the shopping malls with the aim of erecting indoor digital advertising billboards. It alleges that it was denied such due to the fact that there is an agreement between Primedia and Growthpoint in terms of which any available space within the premises of Growthpoint is solely reserved for Primedia. The complainant alleges that a company like Pick n Pay applied for the space and were told that every retail space at the mall was only reserved for Shoprite Group. It alleges that by not allowing other companies to advertise, the conduct of the respondents prevents competition in the market for advertising space. The Commission is investigating the complaint. Mantellis Biscuit Factory vs. Air Chefs (subsidiary of SAA); Snackworks (subsidiary of Anglo Vaal Industries and Ciro (another subsidiary of Anglo Vaal Industries) In this new complaint, the complainant (Mantellis Biscuit Factory) alleges anticompetitive behaviour against Air Chefs (SAA’s wholly owned subsidiary) and AVI (and its subsidiaries Snackworks and Ciro). The complainant is involved in the business of inflight catering. It alleges that the Respondents are preventing it from supplying SAA in terms of a tender awarded early February 2014. The Commission is investigating the complaint. 2.1 Finalised Complaints Mr Karl Upshon vs. Fleetwood Café The Commission has decided to non-refer a complaint by Mr Karl Upshon in the matter concerning Fleetwood. The complainant alleged that the respondent exploits his (the complainant’s) employees by charging exorbitant prices for certain items of food. The Commission found that within a 3km radius of the respondent’s shop there are three independent general dealers providing services similar to the complainant and 18 supermarket chains. It was therefore found that the respondent is unlikely to be able to raise their prices without encountering competition from the alternative stores. 3. Announcements The Commission noted the satisfactory number of submissions received on both the market inquiries into the private healthcare and Liquefied Petroleum Gas sectors. The call for submission for both inquires closed on Friday, 31 October 2014. The teams will now assess the submissions and publish non confidential information on the website. ENDS For more information: Mava Scott, Spokesperson 012 394 3527/ 076 095 2350/ [email protected] Themba Mathebula, External Communication Coordinator 012 394 3325/ 084 896 0860/ [email protected]