The Competition Commission has hit back at Naspers after weekend reports cited senior executives at the Internet and media company accusing the commission of being a hindrance to investment.
A weekend report by the Business Times said Naspers chairman, Koos Bekker, had been critical of the independent public body which conducts in-depth inquiries into merger markets and the surrounding regulation, saying it stifles investment.
The report said Naspers directors and senior executives weren’t impressed by the Competition Commission (CompCom) because of its unfriendly regulations that govern mergers and acquisitions.
“The competition people need to somehow lift themselves to a global level, otherwise they retard investment,” Bekker was quoted as saying.
On Monday, Sipho Ngwema, CompCom spokesperson, had a strongly-worded reaction: “In this context, it is unfortunate that Naspers executives have sought to make generalised statements about the work of the Competition Commission and to paint it as an institution that seeks to hamper investment. Nothing could be further from the truth.”
Ngwema believes the Internet company was not happy with the CompCom’s position regarding the WebuyCars deal.
The commission recommended to the Competition Tribunal that the proposed acquisition of WeBuyCars by MIH eCommerce, an entity of the Naspers Group, be prohibited.
MIH eCommerce wanted to acquire 60% of WeBuyCars. MIH eCommerce is mainly an investment holding company and does not itself supply any products or services in SA, the commission says, adding the holding company had investments in OLX and Naspers subsidiary, Car Trader, which operates as AutoTrader.
The commission found the proposed transaction does not present any competitor (horizontal) overlap in SA, as the Naspers Group is not active in the buying and selling of cars. However, it was found that Naspers, through Frontier Car Group, has been anticipating entering the South African market for the wholesale and online buying of used cars in competition with WeBuyCars.
“In the case of the Naspers acquisition of WeBuyCars, the commission’s investigation identified substantial competition concerns which resulted in the prohibition. Naspers has exercised its right to review that decision before the tribunal and the matter will be heard in October. This is the first acquisition by Naspers in South Africa that has been prohibited and other investments such as in Takealot.com have been approved,” he notes.
Ngwema explains that competition law and merger control in SA is in line with global practice and “is no more restrictive than other jurisdictions. In terms of implementation and practice, the commission and tribunal are held in high regard internationally for the quality of decision-making and enforcement work.
“Each merger is assessed on its merits, and in practice, fewer than 2% of all mergers are prohibited. Furthermore, decisions by the Competition Commission are reviewable before the Competition Tribunal and even the Competition Appeal Court in cases where the merging parties are of the view that an incorrect decision was made.”
Unfair characterisation
Analyst Peter Takaendesa, portfolio manager at Mergence Investment Managers, believes Bekker’s view isn’t “a fair characterisation of the Competition Commission's work in general, but the complaints may be related to specific sectors and transactions”.
“The CompCom is doing a great job to protect our economy from further concentration, as many industries are already very concentrated with few dominant players in South Africa. There may be other specific transactions where the CompCom has been aggressive in its demands.”
According to Takaendesa, the times the CompCom could have been viewed as aggressive “could be due to the complexities of dealing with new digital industries and in some cases potential for significant job losses”.
“The former could be one of the reasons Naspers has battled with the proposed transaction to acquire WeBuyCars. However, Naspers has received approvals on some merger transactions before in this space, such as the Takealot merger.”
Naspers held its extraordinary general meeting (EGM) last week in Cape Town, where the CompCom matter was ventilated.
Prosus listing
The multinational also announced it received majority approval to list Prosus, its new global consumer Internet group, on Euronext Amsterdam.
Naspers is on track to list Prosus on Wednesday, 11 September, along with a secondary, inward listing on the Johannesburg Stock Exchange (JSE).
The company expects to own no less than 73% of Prosus, with a free float of up to 27% created through a capitalisation issue of Prosus shares to Naspers shareholders.
The company says it will retain its primary listing on the JSE.
Naspers CEO Bob van Dijk says: “Following shareholder approval at today’s [Friday’s] EGM, we are on track to list our international Internet assets as Prosus on 11 September. We believe Prosus will present a new and attractive opportunity for global tech investors to access our unique portfolio of Internet businesses, providing a strong foundation for our future growth plans.
He adds the listing is designed to reduce the company’s weighting on the JSE, which he believes will maximise shareholder value over time.
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