HCI order may open floodgates
Competition Appeal Court Judge Dennis Davis says granting declaratory order would set a dangerous precedent
Competition Appeal Court Judge Dennis Davis raised concern about opening the floodgates for parties wanting to sidestep the competition authorities if the court granted the declaratory order sought by Hosken Consolidated Investments.
Competition Appeal Court Judge Dennis Davis raised concern about opening the floodgates for parties wanting to sidestep the competition authorities if the court granted the declaratory order sought by Hosken Consolidated Investments (HCI).
On Monday, the court heard an urgent application brought by HCI for an order that its proposed plan to merge its gaming interests did not require approval from the competition authorities. The application is unprecedented and has drastic implications for the competition authorities. “It would mean that any time anyone wanted to do a transaction, they will come to us first; we’ll be flooded,” said Judge Davis during the court hearing on Monday.
David Unterhalter, counsel for HCI, said it would not open the floodgates because it was such an unusual transaction.
The legal battle around the involvement of the competition authorities has created uncertainty about the future of the proposed transaction, which involves merging the gaming interests held by two of HCI’s subsidiaries, Tsogo Sun and Niveus. On Friday, Tsogo issued a SENS statement, informing shareholders that the transac- tion would be dropped if it had to be filed with the Competition Commission, “unless the parties otherwise agree in writing”.
HCI executive director Yunnis Shaik said on Monday that a filing with the commission could take up to seven months to complete and that this created far too much uncertainty.
One Niveus shareholder said HCI might be concerned Niveus minority shareholders would use the time to push for a better price for its gaming assets, which were being sold to Tsogo. “A group of minorities pushed HCI for more than Johnny [Copelyn, CEO of HCI] wanted to pay. They managed to get more but it’s probably as much as HCI is prepared to pay,” said the Niveus shareholder.
HCI contends it is not required to file the proposed transaction because it controls Niveus and, in 2014, was granted approval by the commission to take control of Tsogo. The approval process was related to HCI acquiring Tsogo shares from SABMiller, giving it a 47% stake in Tsogo.
Unterhalter told the court, that “once permission is granted it is durable”.
However, the commission countered that the approval granted in 2014 was for a distinctly different transaction. “The current transaction relates to the transfer of gaming operations, it is a new transaction that has never been considered by the commission,” said the commission’s head of legal services, Bukhosibakhe Majenge.
“In the earlier transaction, we were told there would be no retrenchments because no businesses were affected. What they’re contemplating now is different.” Majenge also told the court the proposed transaction would take HCI above the critical 50% holding level. He suggested that the latest transaction could be part of a two-phase plan that had been initiated with the SABMiller deal in 2014.
Competition Tribunal member Yasmin Carrim said HCI was involved in “nothing but a cynical attempt to exclude the commission’s regulatory oversight”. The order would be tantamount to shutting the door on the commission’s mandate, she said.
One competition lawyer said: “A declaratory order is just an opinion, but if it’s granted, it’s certain to open the floodgates.
“In future, merging parties will flock to the [Competition] Appeal Court in search of a favourable ruling that would help them avoid the commission,” the lawyer said.
HCI IS INVOLVED IN NOTHING BUT A CYNICAL ATTEMPT TO EXCLUDE THE COMMISSION’S. OVERSIGHT