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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM112Oct23
In the large merger between:
Hemipac Investments Proprietary Limited Primary Acquiring Firm
and
Ascension Properties Proprietary Limited (in
business rescue), in respect of a portfolio of ten (10)
property rental enterprises
Primary Target Firm
Panel: A Kessery (Presiding Member)
A Ndoni (Tribunal Member)
F Tregenna (Tribunal Member)
Heard on: 13 February 2024
Order issued on: 13 February 2024
Reasons Issued on: 6 March 2024
REASONS FOR DECISION
Approval
[1] On 13 February 2024, the Competition Tribunal (“Tribunal”) conditionally
approved the large merger in which Hemipac Investments Proprietary Limited
(“Hemipac Investments”) will acquire, as a going concern, ten (10) property
rental enterprises (the “Target Properties”) from Ascension Properties
Proprietary Limited (“Ascension”). Post-merger, Hemipac Investments will have
sole control of the Target Properties.
It
competitiontribu nal
SOUTH AFR ICA
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Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm, Hemipac Investments, is a wholly-owned subsidiary
of which is ultimately controlled by the
[3] Hemipac Investments, its controlling entities and all the firms controlled by its
controlling entities are collectively referred to as the “SKG Group”.
[4] The SKG Group is involved in the development, leasing and management of
commercial, industrial, office and retail investment properties.
Primary target firm
[5] The primary target firm is Ascension (in business rescue), in respect of the
Target Properties. Ascension is a wholly owned subsidiary of Rebosis Property
Fund Limited (“Rebosis”), a Real Estate Investment Trust listed on the
Johannesburg Stock Exchange. Rebosis is currently in business rescue, under
the supervision of Joint Business Rescue Practitioners.
[6] Rebosis owns a diverse property portfolio in South Africa, comprising retail,
office and industrial properties.
Proposed transaction and rationale
Transaction
[7] In terms of the proposed transaction, Hemipac Investments entered into a
Portfolio Sale Agreement with the Joint Business Rescue Practitioners and
Ascension to acquire the Target Properties in a single indivisible transaction.
Following implementation of the proposed transaction, Hemipac Investments will
exercise sole control over the Target Properties.
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Rationale
[8] The rationale for Hemipac Investments is that a strategic decision was taken to
diversify its portfolio and the proposed acquisition presents a strategic
investment opportunity in the public sector market as the Target Properties are
largely occupied by public sector tenants.
[9] The rationale for Ascension in respect of the Target Properties is that the
proposed transaction is motivated by Rebosis’ current business rescue plan,
which mandates the wind-down sale of assets. The sale of the Target Properties
will maximize value to the benefit of Rebosis’ current creditors. The proposed
transaction will also ensure business continuity of the Target Properties and
secure continued employment of the current employees associated with the
Target Properties.
Competition Assessment
[10] The Tribunal has previously decided that office space can be defined according
to different classes, for example, grades P, A, B or C. 1 In the current case, we
did not receive any evidence suggesting a departure from this approach and
therefore accept the Commission’s definition of the relevant product market as
rentable A-grade and B-grade office space.
[11] In relation to the relevant geographic market, the Tribunal has previously
accepted that office space located within a 5km radius is interchangeable. There
is no reason to depart from the Tribunal’s previous decision and we accept the
Commission’s definition of the relevant geographic market as being a 5km radius
from the Target Properties (the Pretoria Central Business District (“CBD”) and
surrounding nodes, Johannesburg CBD and surrounding nodes, Nelspruit CBD
node and Bellville node).
1Primegro Properties Ltd and Growthpoint Properties Ltd 29/LMJun03; Momentum Property Investments and
Bonatla Property Holdings Ltd 34/LM/Jul03. See also the Tribunal’s more recent decision of Capitec Bank
Limited and SPEAR REIT Limited on behalf of the immovable property and rental enterprise known as the Liberty
Life Office Building LM011Apr23.
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[12] The Commission found that the proposed transaction raises a horizontal overlap
between the activities of the merging parties in relation to the provision of
rentable A-grade and B-grade office space in the Pretoria CBD and surrounding
nodes, Johannesburg CBD and surrounding nodes, Nelspruit CBD node and
Bellville node.
[13] The Commission found that the merged entity will have a market share of less
than % with an accretion of % in the market for the provision of A/B-grade
office space in the Pretoria CBD and surrounding nodes within 5km of the Target
Properties.
[14] The Commission found that the merged entity will have a market share of less
than % with an accretion of % in the market for the provision of A/B-grade
office space in the JHB CBD and surrounding nodes within 5km of the Target
Properties.
[15] The Commission found that the merged entity will have a market share of less
than % with an accretion of % in the market for the provision of B-grade
office space in the Nelspruit CBD node within 5km of the Target Properties.
[16] The Commission found that the merged entity will have a market share of less
than % with an accretion of % in the market for the provision of A/B-grade
office space in the Bellville node within 5km of the Target Properties.
[17] The Commission further found that there are numerous A- and B-grade office
properties in the relevant nodes that will competitively constrain the merged
entity post-merger. Further, the market share accretions remain minimal.
[18] Having regard to the above, and given the relatively low market shares, we are
satisfied that the proposed transaction will not lead to any substantial prevention
or lessening of competition in any relevant market.
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Public interest assessment
Employment
[19] The merging parties submitted that there w ill be no retrenchments or
redundancies as a result of the proposed transaction. All employees currently
employed by the Target Properties will be transferred in terms of section 197 of
the Labour Relations Act, No. 66 of 1995 (as amended).
[20] The employee representatives of the merging parties did not raise any concerns.
[21] Having regard to the above, the Commission concluded that the proposed
transaction is unlikely to raise any employment concerns post-merger.
Spread of ownership
[22] The Commission is of the view that the proposed transaction w ill result in a
dilution of shareholding by historically disadvantaged persons ("HDPs"). In order
to mitigate the effect of this dilution, Hemipac Investments committed to a
remedy relating to procurement from HDPs. To this end, Hemipac Investments
intends to procure its cleaning, security, maintenance and construction
requirements nationally from suppliers who are HDPs for approximately
R1 ,000,000 (one million rand) per year for a period of 3 (three) years from the
implementation date of the transaction.
[23] The Commission noted that the proposed transaction may not have a positive
impact on the promotion of a greater spread ownership, given the dilution of
shareholding by HDPs in the Target Properties. However, Rebosis will retain its
black ownership, and its empowerment status and BBBEE ownership levels will
remain post-merger. The Commission further notes that the Target Properties
will remain majority owned by HDPs post-merger.2
historically disadvantaged person
which is indirectly 51 % owne y
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[24] We are not aware of any other public interest concerns arising in this case.
Based on the above facts, we have no reason to disagree with the Commission's
public interest assessment.
Conclusion
[25] We conclude that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market and the proposed transaction does
not raise any other public interest concerns.
[26] We therefore, approve the proposed transaction subject to the conditions
annexed hereto as Annexure A.
Signed by:Anisa Kessery
Signed at:2024-03-06 11 :52:18 •02:00
Reaso n:Witnessing A nisa Kessery
Adv. Anisa Kessery
6 March 2024
Date
Ms Andiswa Ndoni and Prof. Fiona Tregenna concurring
Tribunal Case Manager:
For the Merging Parties:
For the Commission:
Bobedi Seleke
Vani Chetty of Vani Chetty Competition Law
(Proprietary) Limited
Kgothatso Kgobe and Zanele Hadebe
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CONFIDENTIAL
ANNEXUREA
HEM I PAC INVESTMENTS (PTY) LTD AND ASCENSION PROPERTIES (PTY) LTD (IN
BUSINESS RESCUE) , IN RESPECT OF A PORTFOLIO OF TEN (10) PROPERTY
RENTAL ENTERPRISES
CONDITIONS
1. DEFINITIONS
The follow ing expressions shall bear the meanings assigned to them below, and cognate
expressions bear corresponding m eanings -
1.1 "Acquiring Firm" m eans He m ipac Investm ents (Pty) Ltd;
1.2 "Approval Date" means the date on w hich the Me rger is approved by the Tribunal in
terms of the Co m petition Act;
1.3 "Commission" means the Competition Commission of South Africa, a statutory
body established in terms of section 19 of the Competition Act;
1.4 "Competition Rules" means the R ules for the Cond uct of P roceedings in the
Co m mission;
1.5 "Competition Act" means the Co m petition Act No 89 of 1998, as amended;
1.6 "Conditions" m eans the conditions in this Annexure A ;
1.7 "Days " means any calendar day that is not a Saturday, Sunday, or official public
holiday in So uth Africa;
1.8 "HOP" m eans a historically disadvantaged person as defined in section 3(2) of the
Co m petition Act;
1.9 "HOP Supplier" m eans a supplier that is at least 51 % H D P ow ned;
1.1 O "Implementation Date" m eans the date occurring after the Approval D ate on w hich
the Merger Parties implement the Merger;
1.11 "Merger" means the proposed acquisition by the Acquiring Firm of the Target
Properties as notified to the Commission under Case No. 2023OCT0045;
1.12 "Merger Parties" means the Acquiring Firm and the Seller;
1.13 "Seller” means Ascension Properties (Pty) Ltd;
1.14 “South Africa” means the Republic of South Africa;
1.15 "Target Properties" means ten (10) property rental enterprises owned by the Seller;
1.16 "Tribunal" means the Competition Tribunal of South Africa, a statutory body
established in terms of section 26 of the Competition Act; and
1.16 “Tribunal Rules” means the Rules for the Conduct of Proceedings in the Tribunal.
2. HDP PROCUREMENT
2.1 The Acquiring Firm shall spend R1,000,000 per year (one million rands) towards
procuring cleaning, security, maintenance, and construction requirements
nationally from HDP Suppliers over a period of 3 (three) years from the
Implementation Date.
3. MONITORING OF COMPLIANCE WITH THE CONDITIONS
3.1 The Acquiring Firm shall inform the Commission in writing of the Implementation
Date within 5 (five) Days of the Implementation Date.
3.2 For the duration of the Conditions, the Acquiring Firm shall, on each anniversary
of the Implementation Date, provide the Commission with an affidavit attested to
by a senior official of the Acquiring Firm, confirming its compliance with the
Conditions.
3.3 The Commission may request such additional information from the Merger Parties,
which the Commission may, from time to time, deem necessary to monitor the
extent of compliance with these Conditions.
4. APPARENT BREACH
4.1 Should the Commission receive any complaint in relation to non-compliance with
the above Conditions, or otherwise determine that there has been an apparent
breach by the Merging Parties of these Conditions, the breach shall be dealt with
in terms of Rule 39 of the Commission Rules, read together with Rule 37 of the
Rules for the Conduct of Proceedings in the Tribunal.
5. VARIATION OF CONDITIONS
5.1 The Merger Parties may at any time, on good cause shown, apply to the
Commission for the Conditions to be lifted, revised, or amended. Should a dispute
arise in relation to the variation of the Conditions, the Merger Parties may apply to
the Tribunal, on good cause shown, for the Conditions to be lifted, revised, or
amended.
6. GENERAL
6.1 All correspondence concerning the Conditions must be submitted to the following
email address: mergerconditions@compcom.co.za and ministry@thedtic.gov.za.