Johannesburg - The Competition Tribunal yesterday confirmed that Life Healthcare and Joint Medical Holdings (JMH) had agreed to jointly pay a record R10 million administrative penalty for implementing a merger without approval from the antitrust authorities.
Life Healthcare strengthened 2.4 percent on the JSE after the news of the fine to close at R36.30 yesterday.
Life Healthcare, which operates hospitals in southern Africa, India and Poland, together with JMH, which runs five hospitals in Durban’s inner city, accepted liability for their failure to notify the Competition Commission of the merger in line with the Competition Act.
The parties agreed that they were guilty of fixing the price of services in 2004, a charge the tribunal has dropped.
The confirmation came after the tribunal’s request for further submission before making its final decision on the matter. “The tribunal had requested clarity on whether the consent agreement is in full and final settlement of all matters between the commission and the respondents relating to both the price-fixing contravention and alleged merger contravention, possibly by way of an addendum to the agreement,” the tribunal said.
Drop complaint
“The commission, in the final settlement, agreed to drop the section 4 complaint, in return for the respondents admitting they failed to notify the merger and implementing it, without approval,” the tribunal said.
The Competition Commission accused Life Healthcare of setting the value of services and launched an investigation that found since 2004, the company and JMH had agreed to all their prices being set jointly.
“This meant all price negotiations, including the tariff charged by JMH to various medical schemes, were negotiated by Life Healthcare,” the tribunal said.
André Meyer, Life Healthcare’s chief executive, acknowledged in a statement that the tribunal had confirmed the consent agreement between the group, the Competition Commission and JMH.
“Life Healthcare Group is committed to complying with the terms of the consent agreement, which includes payment of a fine within three months of the date of the confirmation,” Meyer said.
Public offer
Prior to the merger, Life Healthcare held 49 percent of the share capital of JMH. In terms of the transaction, Life Healthcare made a public offer to the other JMH shareholders (comprising some 300 private doctors, their families and trusts) to buy an additional 21 percent of JMH’s shares.
The merger increased Life Healthcare’s interest in JMH to 70 percent. However, Life Healthcare disinvested its 49.3 percent stake in JMH via a share buy-back to the value of R1.209 billion followed by a direct purchase of R156 million. This resulted in a profit on sale of associate of R957m.
According to the company, the group declared a special dividend of 100 cents per share from the proceeds of this sale in March 2014.
BUSINESS REPORT