Competition Commission recommends prohibition of Sun International and Peermont merger

Posted On Thursday, 10 December 2015 12:52 Published by
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The Competition Commission (Commission) has recommended to the Competition Tribunal (Tribunal) that the proposed merger whereby Sun International (South Africa) Limited (SISA) intends to acquire Maxshell 114 Investment (Pty) Ltd (Maxshell) be prohibited.

Hardin_Ratshisusu

The Commission is concerned that if allowed, the merger is likely to give rise to significant competition concerns in the central Gauteng gambling market. SISA is controlled by Sun International Limited, a publicly listed company on the JSE Limited which controls a large number of properties in the hotel, resorts and casino industries in South Africa.

Maxshell is the controlling shareholder of Peermont Global (Pty) Ltd (Peermont), which is a hotel and casino operator. Peermont controls eight casinos in South African, including Emperors Palace.

The implementation of the merger will result in, among other things, SISA acquiring the entire shareholding of Peermont. The Commission found that the merger will result in increased concentration levels in an already highly concentrated industry.

As a result of the transaction, the central Gauteng gambling market will be left with only two major competitors, namely SISA and Tsogo Sun Holdings (Tsogo Sun). This reduction in the number of competitors may lead Tsogo Sun and SISA coordinating their behavior to the detriment of consumers. As part of its assessment of the transaction, the Commission also took into account the imminent relocation of Morula Casino (owned by SISA) from Mabopane, in the North West of Gauteng, to Menlyn, East of Pretoria.

The casino, to be known as Menlyn Maine, is expected to be the largest casino in Gauteng, whose entry into the market would pose a significant competitive constraint on casinos such as Emperors Palace. In light of the above concerns, the merging parties advanced remedies, which the Commission found inadequate to address the competition concerns arising from the merger.

“The gambling industry is significant in the South African economy, with high barriers to entry as it is regulated by the various gambling boards. This merger would have created a highly concentrated market structure in Gauteng thereby substantially lessening competition.

The imminent relocation of the Morula Casino to central Gauteng will substantially increase competition as evidenced, at least, by the initial opposition to the relocation by Peermont, the target firm in this instance,” said acting Deputy Commissioner, Hardin Ratshisusu.

 

Last modified on Sunday, 13 December 2015 12:29

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