The Competition Commission has referred the large merger in which the Tiso consortium proposes to acquire all of the issued share capital currently held by the minority shareholders in New Africa Investments Limited to the Competition Tribunal for adjudication.
The Tiso consortium comprises Multidirect Investments 180 (a wholly-owned subsidiary of Tiso Capital Partners), Capricorn Capital Partners Holding Company, Investec Bank Limited, Safika Holdings and Mineworkers Investment Company.
Nail is an investment holding company with interests in printing, publishing, radio broadcasting, television production as well as ”other assets”.
The Tiso consortium proposes to acquire the assets in Nail and sell them on to interested buyers. The Commission has recommended that the merger be approved with several conditions in the event that the proposed on-selling of certain assets might be delayed or cancelled, according to Karin Coode, head of communications at the Competition Commission.
”In reviewing the proposed merger,” said Coode, ”we evaluated all the markets where the consortium and Nail are active in and we identified the following markets where there could be a potential product overlap, i.e. magazine publishing, radio broadcasting services in Cape Town and Johannesburg, and outdoor advertising.
”We found that the transaction will not substantially prevent or lessen competition in the markets for magazine publishing in South Africa or radio broadcasting in Cape Town. However, we are concerned that the proposed transaction could lead to more highly-concentrated markets for both radio broadcasting in Johannesburg and outdoor advertising in South Africa.
”The Commission accepts that the primary acquiring firm intends to on-sell the majority of Nail’s assets, particularly radio stations in Gauteng and outdoor advertising, which will address competition concerns, but is mindful of the fact that the sale of these assets might be delayed or cancelled for whatever reason and therefore finds it necessary to approve the proposed transaction with conditions.”
The recommended conditions include:
The primary acquiring firm will dispose of Nail’s interest in Jacaranda within a period from the date of conditional approval of this transaction by the Competition Tribunal.
The primary acquiring firm will dispose of Nail’s interest in Kaya FM within a period from the date of conditional approval of this transaction by the Competition Tribunal.
The primary acquiring firm will dispose of Nail’s interest in Nail Outdoor within a period from the date of conditional approval of this transaction by the Competition Tribunal.
The primary acquiring firm shall be obliged to notify the Competition Commission of the sale of any asset as described in numbers 1 to 3 above, irrespective of whether such transaction(s) falls below the threshold for merger notification.
The primary acquiring firm is precluded from appointing Primedia or any other firm that is not a member of the Tiso Consortium to dispose of any of Nail’s assets on behalf of the primary acquiring firm.
No veto right pertaining to the sale of any of Nail’s assets will be granted to Primedia or any other firm that is not a member of the Tiso Consortium.
No firm, other than the primary acquiring firm, shall be authorised to exercise any form of control, including managerial control, over any Nail asset, whether on a temporary or permanent basis, before the Competition Commission or the Competition Tribunal, as the case may be, has approved the particular transaction that transfers control over such affected asset(s).
Another issue this merger transaction raised was whether change of economic control without voting control constituted a notifiable transaction. This question encouraged the competing bidders to lodge an urgent interdict before the Competition Tribunal.
The Tiso consortium notified the Competition Commission of the proposed transaction under protest and with full reservation of their rights. The parties submitted that, although the primary acquiring firm has obtained more than 50% of the issued share capital in Nail, control of Nail still vests with Phaphama, since Phaphama still holds the majority of high voting ordinary shares in Nail. The primary acquiring firm, however, has a call option on the ordinary shares held by Phaphama in Nail, and therefore requested the Commission to evaluate and approve the granting of the call option.
Coode said that the Commission earlier ruled that the transaction is a notifiable merger in terms of section 12(1), 12(2)(a) and/or (g) of the Competition Act of 1998, read together with the judgement delivered by the Competition Tribunal in Ethos Private Equity Fund IV and Tsebo Outsourcing Group, which examined whether change of ownership of more than 50% of share capital constituted notification. – I-Net Bridge