SPE Mid-Market Fund I And Q Link Holdings

The judgment

The court's own file

1 COMPETITION TRIBUNAL OF SOUTH AFRICA Case no: LM107OCT21 SPE Mid-Market Fund I Partnership (represented by the general partner, SPE Mid-Market Fund I General Partner (Pty) Ltd) Primary Acquiring Firm And Q Link Holdings (Pty) Ltd Primary Target Firm Heard on: 09 December 2021 Order Issued on: 09 December 2021 Reasons Issued on: 10 December 2021 REASONS FOR DECISION

[1]On 9 December 2021, the Competition Tribunal unconditionally approved a large merger whereby SPE Mid-Market Fund I Partnership , represented by the general partner, SPE Mid-Market Fund I General Partner (Pty) LtdSPE Fund General Partner, intends to acquire % of the issued share capital and sole control of Q Link Holdings (Pty) Ltd (.

[2]The SPE Fund is controlled by its general partner, the SPE Fund General Partner which is wholly controlled by Namibia. Sanlam is not controlled by any firm and shareholder and its shares are widely held. 1 Sanlam and its subsidiaries are collectively referred to as the The SPE Fund controls the following companies: Cavalier Group of Companies (Pty) Ltd Cavalierand Absolute Pets (Pty) Ltd ).

[3]Q Link is a private company incorporated in accordance with the laws of the Republic of South Africa and it is not controlled by any of its shareholders. 2 Q , a private company incorporated in accordance with the laws of South Africa, with its business address at 6 St Giles Street, Randburg, Johannesburg, Gauteng Province.

[4]The Acquiring Group is a financial services group in South Africa, with business interests elsewhere in Africa, the United Kingdom, Europe, India, Australia, Southeast Asia and the United States of America. The Acquiring Group's areas of expertise include long-term insurance, financial planning, retirement planning, trusts, wills, short-term insurance, asset management, risk 1 As of 31 December 2020, the following entities held more than a 5% shareholding in Sanlam: Ubuntu-Botho Investments (Pty) Ltd, as to 13.13%, and the Government Employees Pension Fund, as to 13.05%. 2 The non-controlling and minority shareholders of Q Link: % Partner which is wholly controlled by 2 management and capital market activities, investment services, lending services and wealth creation. Through its four business clusters, the Acquiring Group provides financial solutions to individual and institutional clients across a multitude of market segments.

[5]The SPE Fund falls within the Sanlam Private Equity division, which falls within the Sanlam Investments cluster. The Sanlam Private Equity division has been active in private equity investing since 1998 and currently manages a portfolio of over R on behalf of the Acquiring Group. The Sanlam Private Equity division recently launched the SPE Fund, a new third-party private equity fund and Black Fund Manager as defined in the Broad-Based Black Economic B-BBEE Codes of Good Practice. The SPE Fund has target capital commitments of R and seeks to partner with entrepreneurs and family owned businesses to make private equity related, as well as B-BBEE investments, in South Africa and the rest of Africa. portfolio currently comprises of the Cavalier 3 and Absolute Pets 4 investments. The SPE Fund has identified Q Link as its third acquisition.

[6]Q Link is a financial technology business that provides payment collection solutions to improve collection rates for third-party benefit providers. Q Link is primarily focused on the insurance industry and processes deductions on behalf of its clients directly fr ection solutions to diversify its revenues. Through QSURE, Q Link has a second operating business which is a funds collection and disbursement business with a primary focus on the short-term insurance industry, servicing intermediaries, brokers and insurers. SLPC Assessment

[7]the proposed transaction does not result in a horizontal overlap. The Commission did, however, identify an existing vertical relationship between the merging parties as Q Link currently provides payment collection solutions payroll deductions, bank deductions and EAO solutions to the Acquiring Group. Q Link has approximately less than 5% market share for the provision of payment collection solutions in South Africa. There are about seven other providers of payment collection solutions to downstream rivals of the Acquiring Group. In addition, the other customers of Q Link (i.e., did not raise any concerns regarding the proposed transaction. The Commission found that the proposed transaction is also unlikely to result in any customer foreclosure concerns. In this regard, the Commission found that approximately internally The largest independent provider of payments and collections services to the Acquiring Group is Based on the above, the Commission was of the view that the prosed transaction is unlikely to substantially prevent or lessen competition. 3 Cavalier Group is a vertically integrated meat producer in South Africa, trading in the procurement, packaging, sale and distribution of red meat and related products. 4 product range covers a broad basket of pet-related products including food, healthcare products and accessories. 3

[8]The Tribunal probed the risk of information sharing through Q Link to Sanlam of who are current Q Link customers; and whether or not a condition protecting against information sharing post-merger, Q Link will continue to operate independently and on a ring-fenced basis with no preferential treatment given to the Sanlam Group nor will any competitive information be shared with Sanlam (or vice versa).

[9]he merging parties provided that there is sufficient structural independence between them; in that, the private equity arm of the Sanlam Group (which includes SPE) is a very small part of the group and Furthermore, there will be no Sanlam representatives on the Q Link board of directors, nor on the SPE board nor any of the other SPE-investee companies. Likewise, there will be no SPE or Q Link representatives on the Sanlam Board of Directors. It was also asserted that the commercial incentives to violate their independence by on independence. Failure to ensure that such independence is maintained post- transaction will likely see Q Link lose customers (and market share). The sharing did not exist. Public Interest Assessment

[10]Regarding the proposed the merging parties provided that the SPE Fund currently does not have any employees in South Africa or elsewhere. The Commission contacted an employee representative at Sanlam Investment Management and SPE Fund General Partner, who confirmed that the proposed transaction does not raise any employment by confirmed that none of Q Link employees have raised any employment concerns regarding the proposed transaction.

[11]Regarding the spread of ownership, Q Link is a level 4 B-BBEE contributor, pre- merger. Both the SPE Fund and its general partner, SPE Fund General Partner are black owned in terms of the B-BBEE Ownership Codes. The Acquiring Group has a historically disadvantaged group shareholding of near 50%. Its largest historically disadvantaged shareholders are Government Employees Pension Fund black economic empowerment partner, Ubuntu-Botho Investments Limited. The transaction will also result in the replacement of a foreign private equity shareholder ( and the introduction of the SPE Fund resulting in Q Link becoming a majority black owned firm - improving its B-BBEE rating from Level 4 to Level 2. 4

[12]We conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. Furthermore, it raises no public interest concerns. 10 December 2021 Mr Enver Daniels Date Prof Imraan Valodia and Dr Thando Vilakazi concurring Tribunal Case Manager: Mpumelelo Tshabalala For the Merging Parties: Sazi Madlala and Richardt van Rensburg of ENSAfrica For the Commission: Zanele Hadebe, Thabelo Masithulela and Tamara Paremoer