Land Bank Gro Capital

The judgment

The court's own file

x x x Communication Result Report { 25.Oct. 2011 14:53) ¥ x* x 1) 2) Date/Time: 25. Oct. 2011 14:46 File Page No. Mode Destination ; Pg (s} Result Not Sent 71698 Memory TX 00112697899 PS OK abigail 44933 OK 44584 ak Reason for error - 1) Hang up or tine fail E.2) Busy £.3) No answer E. 4} No facsimile connection E.5) Exceeded max. E-mail size . competitiontribunal | at south africe — : to Mark Garden fax 011 269 7899 Edward Nathan Sonnenbergs: Legal Services 44283_ Competition Commission ref 72kLMAug 11 date 35 October 2014 from Abigall Mashigo pages 4 (including this page) re Reasons “This message is intended only for the use of the sddressee and may contain information thatis pileged and confidential. If yau are not the Intended revipient,-you arg hereby notified that ‘any dleseminefon of this communication is sticly prohibited. Ifyou have received this ‘communication in ercor, plaase notify ss immediately by telephone, Attached please find the Tribunal's reasons for the decision in the above matter. Regaris hi, Mashigo CC; Dinea Mashege - 44584 3 Floor, Mulsya, the dii Campus, 77 Melalias Strest, Sunnyside, Preforia 12 Private Bag X24, Sunnyside 0132 Tel: 427 (12) 949300 Fax: +27 (1232040169 Enaft ctsagjeompbit.co.ze Website: hitpiwww,compttib.co.za competitiontribunal south africa fax form to Mark Garden fax 011 269 7899 Edward Nathan Sonnenbergs Legal Services 44283 Competition Commission ref 72/LM/Augi1 date 25 October 2011 from Abigail Mashigo pages 5 (including this page) re Reasons This message is intended only for the use of the addressee and may contain information that is privileged and confidential. If you are not the intended recipient, you are hereby notified that any dissemination of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone. Attached please find the Tribunal’s reasons for the decision in the above matter. Regards o } / Abigail Mashigo CC: Dineo Mashego - 44584 3" Floor, Mulayo, the dti Campus, 77 Meintjies Street, Sunnyside, Pretoria & Private Bag X24, Sunnyside 0132 Tel: +27 (12) 394 3300 Fax: +27 (12) 394.0169 Email: ctsa@comptrib.co.za Website: http:/Awww.comptrib.co.za FF competitiontribunal bouth afeien COMPETITION TRIBUNAL OF SOUTH AFRICA Case No:72/LM/AUG11 In the matter between: LAND AND AGRICULTURAL BANK Acquiring Firm OF THE REPUBLIC OF SOUTH AFRICA And THE PERFORMING FARMERS LENDING Target Firm BOOK OF GRO CAPITAL FINANCIAL SERVICES (PROPRIETARY) LIMITED Panel : Norman Mancoim (Presiding Member) Yasmin Carrim (Tribunal Member) Takalani Madima (Tribunal Member) Heard on : 19 October 2011 Order issued on : 20 October 2011 Reasons issued on : 25 October 2011 Reasons for Decision Approval

[1]On 20 October 2011, the Competition Tribunal (“Tribunal”) approved the large merger between Land and Agricultural Bank of the Republic of South Africa and the Performing Farmers Lending Book of Gro Capital Financial Services (Proprietary) Limited. We explain below our reasons for this conclusion. The Parties to the transaction

[2]The primary acquiring firm is Land and Agricultural Bank of the Republic of South Africa (“Land Bank’), an agricultural bank involved in the provision of financial services to participants in the agricultural and rural development as well as the provision of retail and wholesale finance.

[3]The primary target firm is the Performing Farmers Lending Book Limited (“the Farmers Lending Book”) currently owned by Gro Capital Financial Services (Proprietary) (“Gro Cap’). Gro Cap is a wholly owned subsidiary of AFGRI Operations which is controtled by AFGRI Limited.

[4]In terms of the transaction, Land Bank will acquire Gro Cap’s Performing Farmers Lending Book. The Rationale

[5]The merging parties submitted that Land Bank intends to acquire the Farmers Lending Book in order to increase its assets and better fulfil its development mandate. The parties’ activities

[6]Land Bank is involved in the provision of financial services to participants in the agricultural and rural development as well as the provision of retail and wholesale finance. Through one of its subsidiaries, Land Bank also provides insurance products.

[7]The Farmers Lending Book provides retail funds directly to corporate and individual agricultural clients. Some of the retail agricultural funding the Farmers Lending Book offers includes, seasonal production loans, revolving credit facilities, hire purchase contracts, medium term loans and irrigation crop-production loans. The relevant market and the impact on competition

[8]The Commission defined the market as that for the provision of financial services and credit facilities and the brokering of crop and life insurance to firms in crop farming. However, the Commission found that certain elements such. as the size of a client and the amount that a firm is able to provide creates two levels of the market within the broad market for the provision of credit and financial facilities, being the upstream and downstream markets. The Commission submitted that although these two levels relate to the provision of credit facilities and financial services, they are not substitutable for one another. This, the Commission submitted is because, amongst others,’ the customers in the upstream market are other financiai institutions which require the finances in order to further on-lend to smaller companies and individual farmers whilst those in the downstream market are small firms and individual farmers who use the finance for their farming inputs or produce.

[9]As Land Bank is involved in both the upstream and downstream markets whilst the Farmers Lending Book is only involved in the downstream market, the Commission found that there is a horizontal overlap in the downstream market for the retail provision of financial services and credit facilities in the agricultural market. However, the Commission found that.a post-merger market share of 14.15% was too low to raise any competition concerns.

[10]The Commission also found that there is a vertical integration as Land Bank provides the Famers Lending Book with wholesale agricultural lending which the Farmers Lending Book on-lends to agricultural clients but found that as ihe market is fragmented and there are other alternative sources of finance or credit, foreclosure is unlikely.

[11]Accordingly, the Commission concluded that the transaction is unlikely to result in any substantial prevention or lessening of competition in the relevant markets

[12]At the hearing the parties suggested that post merger because of the Land Banks stronger capital base, the Farmers Lending Book would be able to offer retail loans at more competitive rates than it does presently. ' See page 8 of the Commission’s Report. 3 CONCLUSION

[13]The parties submitted that the proposed. transaction will not result in employment losses. The proposed transaction does not raise any other public interest issues.

[14]We agree with the Commission’s conclusion above and find that the merger is unlikely to lead to any substantial prevention or lessening of competition in the relevant market. Accordingly, we approve ithe above merger unconditionally. / 25 October 2011aly NAAN MANOIM DATENO| Yasmin Carrim and Takalani Madima Tribunal Researcher: Tebogo Hlafane For the merging parties: Edward Nathan Sonnenbergs For the Commission: Dineo Mashego