About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2024
>>
[2024] ZACT 36
|
|
Urban Retail Property Investments 1 (Pty) Ltd v K2018365955 (Pty) Ltd (LM097SEP24) [2024] ZACT 36 (15 November 2024)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case no: LM097SEP24
In
the large merger between:
Urban
Retail Property Investments 1 (Pty) Ltd
Primary
Acquiring Firm
And
K2018365955
(Pty) Ltd
Primary
Target Firm
Panel:
I
Valodia (Presiding Member)
A
Ndoni (Tribunal Member)
T
Vilakazi
Heard
on:
23
October 2024
Order
issued on:
24
October 2024
Reasons
Issued on:
15
November 2024
REASONS FOR DECISION
Introduction
[1]
On 24 October 2024, the Competition
Tribunal (“Tribunal”) conditionally approved the large
merger whereby Urban Retail
Property Investments 1 (Pty) Ltd (“URP1”)
intends to acquire 100% of the issued share capital of K2018365955
(SA) (Pty)
Ltd (“K955”). The proposed merger will occur
through a series of inter-related steps that will result in URP1
acquiring,
respectively, direct and indirect control over K2019451018
(SA) (Pty) Ltd (“K018”) and Castleview Property Fund
Limited
(“CVW”).
[2]
Post-merger, URP1 will control K955, K018
and CVW. K955, K018 and CVW, which are collectively referred to as
the “Target Group”.
Parties to the
transaction and their activities
Primary acquiring firm
[3]
[…]
[1]
[4]
URP1 does not control any firm. However, of
relevance to the proposed merger is the fact that URP1 holds a 4.17%
minority, non-controlling
interest in CVW.
[5]
URP1 and all the firms controlling it are
collectively referred to as the “Acquiring Group”.
[6]
The
Acquiring Group constitutes a set of investment funds and their
various portfolio
companies
that
invest
in
firms
across
a
wide
range
of
industries,
[…] In respect of property assets, the Acquiring Group does
not currently control any properties but has a 46.8%
non-controlling
interest in Accelerate Property Fund Limited (“APF”), as
well as a 4.17% minority non-controlling interest
of in CVW, which
both have property portfolios in South Africa in the retail,
commercial and office property markets
[2]
[7]
Notably,
the Acquiring Group has simultaneously filed a merger in terms of
which it will acquire sole control over APF (the “APF
Transaction”).
[3]
Primary target firm
[8]
K955[…] does
not currently control any firm.
[9]
Although
the target firm in the proposed merger is K955, the proposed merger
ultimately
contemplates
an
internal
restructuring
involving
K955
and
its
associates
that will result in K955 controlling K018 and CVW.
[4]
[10]
CVW
wholly owns and controls numerous firms. Of relevance to the proposed
merger is CVW’s strategic investments which include
interest in
the following firms active in the property market: Emira Property
Fund Limited (“Emira”)
[5]
as
to 58.9%; Collins Property Group Limited (“CPG”)
[6]
as to 22.9%; and EPP Community Property JV B.V (“EPP”)
[7]
as to 50.2%.
[11]
K955 and K018 are investment holding
companies that do not conduct any activities of their own.
[12]
CVW is a public property investment company
listed as a Real estate Investment Trust (“REIT”) on the
AltX of the Johannesburg
Stock Exchange (“JSE”). CVW’s
directly held property portfolio (through local subsidiaries)
includes: a retail
property portfolio consisting of 6 community
retail centres; a residential development portfolio consisting of 6
different development
opportunities including in Clifton, Camps Bay
and Higgovale; and a residential property portfolio.
Description of the
transaction and rationale
[13]
In terms of the proposed merger, URP1
intends to acquire 100% of the interest in K955. Through a series of
inter-conditional and
inter-related transaction steps the proposed
merger will also result in URP1 acquiring indirect control over K018
and CVW.
[14]
Post-merger, URP1 will wholly own and
control K955 and directly and indirectly, hold 89.8% of the shares in
CVW.
[15]
[…]
Competition
assessment
[16]
The Competition Commission (“Commission”)
considered the activities of the merging parties and concluded that
at the
time of filing, there was no horizontal overlap between the
merging parties’ activities. That is because the Acquiring
Group’s
only property activity is through its non-controlling
interest in APF.
[17]
The
Commission however conducted its assessment on a forward-looking
basis, to consider the increased concentration that would arise
from
the Acquiring Group having control over both APF in terms of the APF
Transaction and the Target Group in terms of the instant
merger (“CVW
Transaction”).
[8]
The
Commission considered the market for the provision of rentable retail
properties and office (A-grade) properties, because both
APF and the
Target Group hold retail (comparative, neighbourhood and local
convenience centres) and office (A- grade) properties
in South
Africa.
The market for the
provision of rentable retail space properties
[18]
As
regards the product market, the Commission relied on the matters
between
Community
Property Company (Pty) Ltd and Luvon Investments (Pty) Ltd and Twin
City (Pty) Ltd in respect of Sam Ntuli Mall (“Luvon
and Sam
Ntuli Mall Merger”)
[9]
and
Vukile
Property Fund Limited and NAD Property Income Fund (Pty) Ltd, in
respect of Batho Plaza and Moruleng Mall, (“Vukile
and Batho
Plaza Merger”)
[10]
to define the product market as the market for the provision of
rentable retail property namely free standing, convenience centres,
community centres, neighbourhood centres and local convenience
centres.
[11]
[19]
In relation to the
geographic market, the Commission relied on the
Luvon
and Sam Ntuli Mall Merger
and
the
Vukile and Batho
Plaza Merger
to
define the geographic market as a radius of 15 kilometres (kms) from
retail properties owned by APF; being Fourways Mall, Cedar
Shopping
Centre and The Buzz (comparative centres); Waterford and Valleyview
Centre (neighbourhood and local convenience centres)
and Beacon Isle
(neighbourhood and local convenience centres).
[20]
The Commission assessed the following
geographic markets: (i) the market for the provision of rentable
retail space in comparative
centres within a 15 km radius from
Fourways Mall, Cedar Shopping Centre and The Buzz; (ii) the market
for the provision of rentable
retail space in neighbourhood and local
convenience centres within a 15 km radius from Waterford and
Valleyview Centre; and (iii)
the market for the provision of rentable
retail space in neighbourhood and local convenience centres within a
15 km radius from
Beacon Isle.
[21]
We
noted, however that the merging parties adopted the following
geographic markets: (i) the market for the provision of rentable
retail space in comparative centres within a 15 km radius from
Fourways Mall, Cedar Shopping Centre and The Buzz, (ii) the market
for the provision of rentable retail space in neighbourhood and local
convenience centres within a 10 km radius from Waterford
and
Valleyview Centre; and (iii) the market for the provision of rentable
retail space in neighbourhood and local convenience centres
within a
10 km radius from Beacon Isle.
[12]
[22]
Given the different views adopted by the
Commission and the merging parties in relation to the geographic
radius in the market for
the provision of rentable retail space in
neighbourhoods and local convenience centres (the Commission adopted
a radius of 15 km,
whereas the merging parties adopted a radius of 10
km), we requested the Commission and merging parties to provide their
views
on the appropriate geographic radius of be applied in the
aforementioned market.
[23]
The
Commission indicated that it relied on the
Luvon
and Sam Ntuli Mall Merger
and
the
Vukile
and Batho Plaza Merger
to
define the geographic market as a radius
of
15
km.
Furthermore,
the
Commission
does
not
consider
any
discrepancy between the radius applied by the Commission and the
merging parties as consequential since the assessment shows
that
there are many credible alternatives (on either radius applied).
[13]
[24]
The
merging parties disagreed with the Commission and stated that in
respect of neighbourhood centres and local convenience centres,
the
appropriate area of consideration is 5 to 10 kms. In this regard, the
merging parties relied on the matter between
Nedbank
Limited v Emling Properties (Pty) Ltd (“Nedbank and Emling
Merger”).
[14]
[25]
We leave the exact extent of the geographic
market open as it does not alter our conclusion on the competition
effects in the proposed
merger.
The market for
rentable A-grade office space properties
[26]
In
respect of the market for rentable A-grade office property, the
Commission relied on the matter
K2012150042
South Africa (Pty) Ltd and Wanooka Properties (Pty) Ltd (“Wanooka
Merger”)
[15]
to
define the product and geographic market as the market for rentable
A-grade office property within a radius of 5 km.
Market shares and
concentration
[27]
The Commission’s found that the
merged entity (including the Target Group and APF) will have a market
share of approximately
13.6%, with an accretion of 1.2% in the market
for the provision of rentable retail space in comparative centres
within a 15 km
radius from Fourways Mall, Cedar Shopping Centre and
The Buzz. The Commission further found that there are numerous
comparative
centres within 15 km from the relevant shopping centres
that will constrain the merged entity, namely, Clearwater Mall,
Fourways
Crossing and Sandton City Mall.
[28]
The Commission’s found that the
merged entity (including APF and the Target Group) will have a market
share of 15.9%, with
an accretion of 7.7% in the market for the
provision of rentable retail space in neighbourhood and local
convenience centres within
a 15 km radius from Waterford and
Valleyview Centre. The Commission further found that there are
numerous neighbourhood and local
convenience centres within 15 km
from the relevant shopping centres that will constrain the merged
entity, namely, Riverside Shopping
Centre, Bryanston Shopping Centre
and Kyalami Downs.
[29]
The Commission’s investigation found
that the merged entity (including APF and CVW) will have a market
share of 16.6%, with
an accretion of 12.9% in the market for the
provision of rentable retail space in neighbourhood and local
convenience centres within
a 15 km radius from Beacon Isle. The
Commission further found that there are numerous competitors within
15 km from the relevant
shopping centre that will constrain the
merged entity, namely, Cresta Crossing, Mountain View Shopping Centre
and Northcliff Piazza.
[30]
In the market for the provision of rentable
A-grade office space properties, the Commission found that the merged
entity will have
a market share of […], with an accretion of
[…]. The Commission further found that there are numerous A-
grade office
properties within 5 km from the relevant office
properties that will constrain the merged entity, namely, Grayston
Office Park,
GreenPark Corner and The Place.
[31]
We requested the Commission and the merging
parties to explain how the assessment of the market shares and market
share accretions,
with respect to the 3 identified markets for the
provision of rentable retail property would change if the relevant
radius were
applied from the properties owned by CVW (being Randridge
Mall in Pretoria and Boskruin Shopping Centres in Randburg) as
opposed
to the properties owned by APF.
[32]
In
response, the merging parties provided the following market
shares:
[16]
32.1.
The market for the provision of rentable
retail space in comparative shopping centres within a 15 km radius of
Randridge Mall
- The proposed merger
will result in the merged entity having a combined market share of
approximately 15.6%.
32.2.
The market for the provision of rentable
retail space in neighbourhood centres and local convenience centres
with a 10 km radius
of Boskruin Shopping Centre -
The
proposed merger will result in the merged entity having a combined
market share of approximately 11.4%.
Information
exchange
assessment
[33]
The Commission considered whether the
proposed merger will result in structural links that that may
facilitate the exchange of competitively
sensitive information. This
is because the implementation of the proposed merger and the APF
Transaction the Acquiring Group will
control or have interests in
competing property firms, namely, APF (sole control) and the Target
Group (including, CVW, Emira,
CPG and the EPP).
[34]
The Commission’s findings are
summarised below.
34.1.
Post-implementation of the proposed merger
and the APF Transaction, the Acquiring Group will have sole,
unfettered control over
each APF and the Target Group. Furthermore,
the Commission notes that within the Target Group, CVW already has
sole, unfettered
control over Emira. Therefore, following the
implementation of the CVW and APF Transactions, the Acquiring Group
will have sole,
unfettered control over CVW, APF and Emira, who will
all be constituent firms within a single-economic entity (controlled
by a
single mind).
34.2.
Regarding
CPG, the Commission found that CVW already jointly controls CPG. In
addition, the Commission notes that the CPG transaction
was
considered by the Tribunal
[17]
and a restriction on cross-directorships was not required by the
Tribunal.
34.3.
The
Commission further found that EPP only holds properties in Poland and
thus does not compete with the relevant property firms
mentioned
above.
[18]
[35]
Considering the above, the Commission found
that no further intervention is required as regards any
cross-directorship concerns.
Creeping merger
assessment
[36]
Given the fact that the Acquiring Group is
simultaneously acquiring 2 property firms (through the proposed
instant merger as well
as the APF Transaction) and the extensive
shareholdings it will have in other firms owned by CVW and APF, the
Commission conducted
a creeping mergers assessment. The Commission
considered previous transactions by the Acquiring Group in the past 3
years and found
that other than the proposed merger (and the APF
Transaction), the Acquiring Group has not acquired any property
companies in the
last 3 years.
[37]
[…]
[19]
In this regard, we requested the Commission to clarify whether it
considered any acquisitions of property companies by CVW in the
last
3 years given that the Acquiring Group previously held a majority
interest in CVW, and to explain whether or not there is
likely to be
a creeping merger concern arising from the assessment.
[38]
In response, the Commission stated that it
assessed creeping mergers from the perspective of the Acquiring
Group, not from CVW’s
perspective. Furthermore, that the
Commission typically approaches a creeping merger assessment from the
perspective of the acquirer,
albeit the fact that section12A(2)(k)
suggests that creeping mergers by any other party to the merger can
be considered. The Commission
further submits that the creeping
merger assessment in the proposed merger was academic, since neither
of the acquisitions being
made by the Acquiring Group, raise any
market power concerns.
[39]
The proposed merger does not give rise to
any vertical concerns.
[40]
Based on the above, we are of the view that
the proposed merger is unlikely to result in the substantial
prevention or lessening
of competition in any relevant market.
Public
interest
Employment
[41]
The
merging parties have provided an unequivocal undertaking that the
proposed merger will have no negative effect on employment
in South
Africa and no retrenchments.
[20]
This was corroborated by the Commission’s team with the
respective employee representatives.
[42]
We are of the view that the proposed merger
is unlikely to have a negative impact on employment.
Promotion of a greater
spread of ownership
[43]
[…]
[21]
[…]
[44]
The
Commission
queried
the
HDP
credentials
of
the
merging
parties
[…]. This is because “ownership” in terms of the
Act does not envisage “control”, and therefore,
economic
interest in firms by HDPs (through mandated investments) should
suffice in determining the promotion of a greater spread
of ownership
in mergers.
[22]
[…]
[23]
[45]
Since
the merging parties tendered the commitments above, the Commission
did not reach a definitive view on the merging parties’
submissions, but did find that the commitments address the
requirements in section 12A3(c) and (e) of the Act
[24]
[46]
We are of the view that the proposed merger
raises no substantial issues regarding the promotion of a greater
spread of ownership.
Conclusion
[47]
For the reasons set out above, we are
satisfied that the proposed merger is unlikely
to
substantially
prevent
or
lessen
competition
in
any
relevant
market.
[48]
We accordingly approved the merger on the
basis of the conditions in Annexure A to our order dated 24 October
2024.
Signed
by:Imraan Valodia
Signed
at:2024-11-15 11:07:26 +02:00
Reason:Witnessing
Imraan Valodia
15 November 2024
Prof.
Imraan
Valodia
Date
Ms Andiswa Ndoni and
Prof. Thando Vilakazi
Tribunal
Case Manager:
Tarryn
Sampson
For
the Merging Parties:
Lameez
Mayet and Lizel Blignaut of ENS Africa
For
the Commission:
Kgothatso
Kgobe and Wiri Gumbie
[1]
[…]
[2]
See
the Joint Competitiveness Report in the Meger record para 4.1.3,
page 63.
[3]
Tribunal
Case No. LM095Sep24.
[4]
See
the Joint Competitiveness Report in the Merger Record para 4.2, page
45.
[5]
Emira
Property Fund Limited, a diversified real estate investment trust
listed on the JSE. Its portfolio spans multiple property
sectors,
including office, retail, residential and industrial properties. See
the Joint Competitiveness Report in the Merger
Record para 4.2.3,
page 64.
[6]
Collins
Property Group Limited operates a property portfolio in Southern
Africa and Europe.
[7]
EPP
operates a portfolio of twelve community retail centres and three
office properties in Poland.
[8]
See
the Commission’s Recommendation in the Merger Record para 18,
page 15.
[9]
Tribunal
Case No. LM0180Feb23.
[10]
Tribunal
Case No. LM197Feb15.
[11]
See
the Commission’s Recommendation in the Merger Record para 18,
page 15.
[12]
See
the Joint Competitiveness Repot in the Merger Record para 5, page
65.
[13]
See
email correspondence from the Commission dated 22 October 2024.
[14]
Tribunal
Case No. LM163Dec22. See the letter from the merging parties dated
22 October 2024 para, 3.1.3, page 3.
[15]
Tribunal
Case No. LM267Mar19.
[16]
See
letter from the merging parties dated 22 October para 3.2, pages 3 -
8.
[17]
Tribunal
Case No. LM098Oct23.
[18]
See
the Commission’s Recommendation in the Merger Record para 33,
page 18.
[19]
See
the Joint Competitiveness Report in the Merger Record para 3, pages
62 – 63.
[20]
See
the Joint Competitiveness Report in the Merger Record para 7.2, page
67.
[21]
See
the Joint Competitiveness Report in the Merger Record para 7.5.2,
page 68.
[22]
See
letter from the merging parties in the Merger Record para 9, page
309.
[23]
See
the Commission’s Recommendation in the Merger Record para 45,
page 21.
[24]
See
the Commission’s Recommendation in the Merger Record para 46,
page 21.