Mergers Week Day 1 - What is a Merger?

In terms of section 45(1) of the Competition Act a merger occurs when one or more enterprises directly acquires or establishes direct or indirect control over the whole or part of the business of another enterprise.

Acquisition of control over the whole or part of another enterprise may be achieved in any manner including:

a)   The purchase or lease of shares, an interest, or assets of the other enterprise in question; or

b)   Amalgamation or other combination with that enterprise.

What is Acquisition of Control?

 According to Section 45(3) a person controls an enterprise if that person:

a)   Beneficially owns more than one half of the issued share capital of the enterprise;

b)   Is entitled to exercise a majority of the votes that may be cast at a general meeting of the enterprise, or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that enterprise;

c)   Is able to appoint or to veto the appointment of a majority of the directors of the enterprise;

d)   Is a holding company, and the enterprise is a subsidiary of that company as contemplated in the Companies Act.

e)   In the case of an enterprise being a trust, has the ability to control the majority of the votes of the trustees or to appoint or change the majority of the beneficiaries of the trust;

f)     In the case of the enterprise being a close corporation, owns the majority of the members’ interest or controls directly or has the right to control the majority of members’ votes in the close corporation; or

g)   Has the ability materially to influence the policy of the enterprise in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs (a) to (f).