COMPETITION TRIBUNAL OF SOUTH AFRICA

Case No: LM116Aug15

In the matter between:

Investec Bank Limited (investee") as nominee	Primary Acquiring Firms

for a private Limited liability company (New ltec Holdco)

And

ltec Group Proprietary Limited and
ltec Proprietary Limited

Primary Target Firms

Panel		Medi Mokuena (Presiding Member), Andiswa Ndoni (Tribunal Member) Anton Roskam (Tribunal Member)

Heard on
Order issued on Reasons issued on

21 October 2015
21 October 2015
16 November 2015

Reasons for Decision

Approval

[1] 	On  21  October  2015  the  Competition  Tribunal  ("Tribunal") unconditionally approved the large merger between Investec  Bank Limited (Investec") as  nominee for a private Limited liability company (New ltec Holdco) ("New HoldCo")  and  ltec Group  Proprietary  Limited (itec Group") and ltec Proprietary Limited ("itec"). The reasons for approving the transaction follow.

Parties to the transaction

[2] 	The primary acquiring firm is Investec, a public company incorporated in terms of the laws of the Republic of South Africa ("RSA"). Investec has six business divisions namely: Investee's Private  banking  division, Private Client  Portfolio  Management  and  stockbroking  division,  Capital

Market division, Asset management division, Investec banking activities and Investec Properties Limited. Through its interests  in various firms, Investec is also involved in other sectors such as hospitality industry, plastic packaging, manufacturing of bricks and ship repairs amongst others. Of relevance to the proposed transaction is Investee's investment  in Tarsus Technology  Group  (Proprietary)  Limited  (Tarsus
Tech") formerly known as MB Technologies.    Tarsus Tech is active in
the information technology ("IT") sector as a seller and distributor of IT equipment, through entities  such  as Tarsus Chanel Capital Proprietary Limited {"Channel Capital"), Printacom Technologies and Tarsus Distribution. The brands distributed by Tarsus Tech include Canon, Dell, HP and Lenovo amongst others. Such products are mainly supplied to resellers who then on-sell to end users. Tarsus Tech also provides financial services, by brokering of financing for  IT  hardware,  software and the provision of credit through a 60 day days credit plan.

[3] 	New Holdco is controlled by a newly formed special purpose vehicle, Bowwood and Main No 188 Proprietary Limited ("Bowwood and Main"), in which Investec will hold 61% and Khulasande Capital Partners ("Khulasande") 39%.

[4]   	Itee's business is divided into three areas mainly the importing, financing and selling of equipment and services and on-going-service and support of the equipment and service. Through its various entities and channel partners, the ltec group of companies are a leading  provider  of document    management    and    print   systems,    production    printing,
enterprise  communications  and  financial  products.   ltec  and  the  ltec
Group of companies supply Minolta  (which is then branded under the ltec brand) and Lexmark IT equipment. ltec also supplies IT equipment through a rental solution in terms of which they lease the IT equipment and at the end of the lease ownership reverts back to ltec. During the lease period ltec takes care of maintenance to the equipment. In relation

to financial activities, ltec/ltec Group provides finance to end users of its channel partners by way of lease financing agreements and undertakes to the collection of the funds owed.

Proposed transaction and rationale

[5] 	Through the Share Purchase and Claims Agreement, New Holdco will acquire control over ltec and ltec Group. This will take place by way of a three  stage  process.   Post-merger  New  Holdco will  hold  100% of ltec
Group and ltec. These shares will be held by an Investec controlled by Bowwood & Main 90% and Management 10%.

[6] 	The proposed transaction provides the ltec Group shareholders with an opportunity to  realise their investment and exit the market. ltec on the other hand will also benefit from the introduction of financial, empowered shareholders and exit from a majority shareholder based in the United Kingdom who is not operationally involved in the target firms.

Competition  assessment

[7] The proposed transaction grves rise to a horizontal overlap, as the merging parties are both active in the distribution of IT equipment (printers and fax machines) and in the provision of financing services in the IT market.

[8] The Commission spoke to various market participants such as Mustek Limited ("Mustek"), Konica Minolta Inc. ("Minolta") and Bytes Technology Group (""Bytes"). These competitors revealed to the Commission that although the merging parties are both active in the same markets, they are not direct competitors, since Tarsus Tech is active in the low-end segment of the IT market, whilst the ltec Group is active in the high-end segment of the market. The difference between the two is that the low­ end  segment  distributes  IT equipment  that  is  suitable  for  home  and

personal use, whilst the high-end segment distributes IT equipment suitable for corporate and government departments because of its capacity. During the hearing, Mr Alan Chapman of ltec elaborated further and submitted that the retention model used by ltec involves the retention  of  ownership over  time  so  that  ltec  retains ownership  of  its
equipment. It was submitted further by the merging parties that leasing
the equipment makes more commercial sense to the client than to own, as the equipment comprises of big printers that print high volumes of paper at a high speed.

[9] 	Based on these submissions, the Commission decided not to assess the horizontal overlap any further. The Commission thus concluded that the proposed transaction is unlikely to substantially prevent or lessen competition within the IT equipment market. We concur with the Commission on its findings.

Public Interest

[10] The proposed transaction will not have any negative impact  on employment. The proposed transaction raises no other public interest concerns.

CONCLUSION

[11]   We agree with the Commission's findings that the proposed transaction is unlikely to substantially prevent or lessen competition in the identified market. We therefore approve the transaction without conditions.

Ms Medi Mokuena

16 November 2015 DATE

Ms Andiswa Ndoni and Mr Anton Roskam concurring

Tribunal Researcher: For the merging parties: For the Commission:

Caroline Sserufusa
Natalie von Ey of Cliffe Dekker Hofmeyr Reabetswe Molotsi