---

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 82/FN/Oct04

In the matter between:

The Competition Commission Applicant

and

The Tiso Consortium First Respondent

New Africa Investments Limited Second Respondent

Investec Bank Limited Third Respondent

Safika Holdings (Pty) Ltd Fourth Respondent

Capricorn Capital Partners Holding Fifth Respondent

Company (Pty) Ltd

Multidirect Investments 180 (Pty) Ltd Sixth Respondent

Mineworkers Investment Company (Pty) Ltd Seventh Respondent

________________________________________________________________

Order

________________________________________________________________

Further to the application of the Competition Commission in terms of Section 49D, in the above matter -

The Tribunal hereby confirms the agreement between the Competition Commission and the respondents, and which is annexed hereto marked “A”, as a consent order in terms of section 49D(3).

______________ 21 October 2004

Norman Manoim Date

Concurring: David Lewis and Mbuyiseli Madlanga

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

Case No: 82/FN/Oct04

In the matter between:

The Competition Commission Applicant

and

The Tiso Consortium First Respondent

New Africa Investments Limited Second Respondent

Investec Bank Limited Third Respondent

Safika Holdings (Pty) Ltd Fourth Respondent

Capricorn Capital Partners Holding Fifth Respondent

Company (Pty) Ltd

Multidirect Investments 180 (Pty) Ltd Sixth Respondent

Mineworkers Investment Company (Pty) Ltd Seventh Respondent

________________________________________________________________

REASONS

________________________________________________________________

1. In this case we have agreed to make a settlement agreement between the Competition Commission and the respondents, a consent order in terms of section 49 D of the Act. The material terms of the order are that the members of the Tiso Consortium, agree jointly and severally to pay an administrative fine of R 500 000,00 (Five hundred thousand rand) for implementing a merger without the prior approval of the Competition Tribunal in contravention of section 13A (3) of the Act.¹

2. Although it is not our normal practice to provide reasons for approving a consent order, in this case, we have decided to do so.

3. This application for a consent order arises from a contest for the control of New Africa Investments Limited (Nail) in 2003. Two rival consortia, the Tiso Consortium (“Tiso”) and the Kagiso Consortium (“Kagiso”) had made rival bids to Nail shareholders for their shares. The bids were structured differently. One significant distinction was that the Kagiso bid was conditional on Competition Act (the “Act”) approval, whilst the Tiso bid was not.

4. Tiso exploited this distinction as a selling point to Nail shareholders in motivating acceptance of its offer ahead of Kagiso’s. In its circular to shareholders making the offer, Tiso inter alia argued that –

“The Tiso Consortium’s offer has been structured in as simple a manner possible to allow Nail shareholders the maximum degree of certainty when accepting the offer- …

• by eliminating the need to wait until the end of an uncertain

regulatory process” ²

5. Tiso succeeded in securing the shares and subsequently control of Nail. The transaction was subsequently notified as a merger after the Commission, in an application for an interdict (the “interdict application”) that was previously before us, had expressed the view that the merger was indeed notifiable. The Commission, in the interdict application, argued that the Tiso consortium had acquired control of Nail, inter alia, in terms of section 12(2)(a). The merger was subsequently notified to the Tribunal and was approved subject to conditions.³

6. It seems common cause that the failure to notify was not motivated by a desire to avoid regulatory scrutiny because the merger might fall foul of the Act. Rather, the motivation for not notifying appears to have been animated by the desire to present a more attractive ‘risk free’ bid to shareholders.⁴

7. The crisp issue that the Commission had to determine in its investigation was whether Tiso genuinely believed that its scheme complied with the law and that it was not obliged to notify, even though the Commission considers this view of the law erroneous.

8. We were advised at the hearing that the Commission has accepted that the Tiso Consortium had in good faith not notified, because, on account of the complex Nail share structure, it did not believe it had crossed a ‘bright line’ in the Act for presuming a change of control.⁵ The Commission conceded that it had not investigated further whether this view was held by Tiso at the relevant time, but had accepted the views of the parties’ legal advisors that they genuinely believed this transaction not to be notifiable.

9. We have no reason to second guess the Commission on these facts and accept that if the parties were bona fide, the fine is appropriate.

10. Nevertheless we have some words of caution and hence our decision to give reasons for our order.

11. In our view, if the motivation for not notifying had not been bona fide, then the fine of R 500 000 would be inadequate, by an order of magnitude. It would be sad day indeed for our legal system that if in the race to reach a destination first, the party that that had no scruples about jumping a red light on the way, always won against the party that obeyed the law and stopped while waiting for the green. An appropriate sanction in these circumstances should ensure that the fine for jumping the light significantly diminishes the spoils of the prize.

12. The Commission should in future, in situations where there may be grounds for parties to have a motive not to notify, investigate the case further, and not merely accept the merging parties say so.

13. Transacting parties in the situation of Tiso, should endeavour to engage the Commission before the fact, and not after, in situations where the obligation to notify is not clear. ⁶ We have some sympathy with Tiso’s contention that time is of the essence when structuring rival bids, but perhaps the Commission needs to assure parties that it can grant expedited advice when the circumstances justify it.

14. Our comments are made not to cast possible doubt on the merging parties bona fides - there is no evidence before us to suggest that their contentions should not be accepted. Rather we see the occasion as a useful opportunity to give guidance to the Commission and merging parties placed in a similar situation in future.

______________ 21 October 2004

Norman Manoim Date

Concurring: David Lewis and Mbuyiseli Madlanga

For the Commission: Mark Worsley (Legal Services Division)

For NAIL: Lee Mendelsohn & Justin Balkin (Edward Nathan & Friedland Corporate Law Advisers)

For the Tiso Consortium: Zoe Banchetti & Safeera Mayet (Tugendhaft Wapnick Banchetti & Partners)

---