31 January 2013

Namibia: NACC Reviews Proposed Merger Between E-Med and Isos

Namibia's two largest emergency medical evacuation and transfer services providers E-Med and ISOS have been asked to provide proof that the merger they are proposing would not stifle competition and harm the small players in the market.

The proposed merger will entail E-Med and ISOS transferring all their emergency medical equipment and staff to a newly formed company called Newco. The two companies have motivated the merger to the Namibian Competition Commission saying the merger would widen their service to the Namibian population. However, the public and the emergency evacuation market did not necessarily agree with the rationale, when the Namibian Competition Commission held a public meeting for all players in the market to air their views and concerns.

"One of the concerns raised is that the merged entity will make it more difficult for smaller companies, especially those owned by previously disadvantaged persons, to gain access to or be competitive in the market," explained Vitalis Ndalikokule, the commission's director for mergers and acquisitions. Ndalikokule says the two parties have not demonstrated that the alleged benefits arising from the proposed transaction cannot be achieved without the merger.

In their submission to the commission E-Med and ISOS said the main rationale of the proposed transaction is to enable Newco to offer its services to a wider segment of the Namibian population by way of rationalising the existing investments of the two competitors in the emergency medical evacuation and transfer services market.

Both companies use road and air transport to provide services to their customers and are believed to be the two biggest privately owned companies providing these emergency services Namibia. The companies also claim that the merged entity will achieve economies of scale to increase its geographical footprint in Namibia, and that the merger will enable them to provide services to more remote areas of the country particularly for the benefit of tourists and rural communities.

"Economic theory suggests that competition is an important ingredient to overall economic development. There is ample evidence in economic literature that confirms that when firms compete in a market, consumers almost always benefit.

"Firms invest in research and development, thereby improving their current offering and introduce new goods and services to the economy, thereby enhancing consumer choice.

Firms also find better ways of producing goods and services, thereby reducing production costs and eventually reducing the price at which goods and services are sold in the market," said Mihe Gaomab, Chief Executive Officer and Secretary to the Commission.

The financial rationale for the proposed merger mentions that capital outlay and investment will be reduced as assets and infrastructure can be combined in Windhoek and optimised in other locations.

The merging parties also submitted that the transaction would have no negative impacts on employment. Both E-Med and ISOS will be given an opportunity to respond verbally or in writing to the issues raised.

The Namibian Competition Commission is a statutory body established by an Act of Parliament (Competition Act No 2 of 2003).

The main objective of the commission is to safeguard and promote competition in the Namibian economy.

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