COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 21/LM/Apr02
In the large merger between:
V&A Waterfront Holdings (Pty) Ltd
and
V&A Waterfront Properties Ltd, V&A Waterfront Marina (Pty) Ltd And
Victoria & Alfred Waterfront (Pty) Ltd
Reasons for Decision
________________________________________________________________
APPROVAL
On 8 May 2002 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between V&A Waterfront Holdings (Pty) Ltd and V&A
Waterfront Properties Ltd, V&A Waterfront Marina (Pty) Ltd And Victoria & Alfred
Waterfront (Pty) Ltd (Pty) Ltd in terms of section 16(2)(a). The reasons for the
approval of the merger appear below.
Background to the merger transaction
1. The V&A Waterfront development is a “mixeduse” development
comprising activities such as fishing, shopping, offices and residential
facilities. It is a major tourist attraction in the Western Cape.
2. Transnet Pension Fund acquired the Waterfront from Transnet Limited
(“Transnet”) in 1994 . Transnet however retained ownership in the
management company.
3. During 200001, the Transnet Pension fund sold the marina land and
rental enterprise to V& A Properties.
4. Later the Transnet Pension Fund was split into three funds, the Pension
Fund, Second Defined Benefit Fund and Retirement Fund (“the Funds”).
The three funds jointly owned the assets, liabilities, rights and obligations
of the assets owned by Transnet Pension Fund. The three funds therefore
collectively own the property at the Waterfront. At present, Transnet owns
the management company that runs the Waterfront. We set out below in
Diagram 1 the structure of the V& A Group prior to the merger.
DIAGRAM 1: PREMERGER STRUCTURE
30.5%
Management agreement
5. This transaction is essentially a restructuring of the V&A Group. It entails
the formation of V&A Waterfront Holdings (Pty) Ltd (“V&A Holdings”), a
private company, which is the vehicle through which the various Funds
and Transnet are merging their respective interests in the Waterfront, in
proportion to their respective contributions. Transnet will now acquire an
equity stake in the Waterfront itself.
6. The companies being acquired are V&A Marina, V&A Property and V&A
Management, as well as V&A Waterfront Developments (Pty) Ltd and V&A
Realtors (Pty) Ltd. V&A Holdings will be the holding company for these
various Waterfront operational companies.
• V&A Marina (Pty) Ltd owns the Marina residential development. Its
function is to develop residential apartments for sale by sectional
title.
• V&A Properties (Pty) Ltd owns and leases out the entire Waterfront
property, comprising the hotel, offices, retail stores and fishing and
port activities. It does not own the marina property, as stated
above.
• V&A Waterfront (Pty) Ltd (the “Management Company”) manages
the property owned by V&A Properties and V&A Marina.
• Both V&A Waterfront Developments (Pty) Ltd and V&A Realtors
(Pty) Ltd are presently dormant companies.
7. Pursuant to this transaction, Transnet will acquire a minority interest in the
Waterfront, with the other 74% being held by the funds. V&A Holdings will
accordingly serve as the vehicle through which the four shareholders hold
their interest in the Waterfront. Postmerger it will hold 100% in each of the
subsidiaries. (See Diagram 2 Below)
8. The purchase price is being paid by way of an allotment and issue of
shares and debentures in V&A Holdings to the Fund.
9. Postmerger the Waterfront will be managed on a daytoday basis by the
operational companies with the four shareholders being merely investors.
DIAGRAM 2: RESTRUCTURING POSTMERGER:
Transnet
Retirement
Fund
26% 7.8%43.6% 22.6%
V&A
Developments
V&A Realtors
Rationale for the Transaction
10. V&A Holdings is being formed as a means to settle outstanding
contractual obligations between the Funds and Transnet (arising from the
1994 sale), raise external funding for future development projects at the
Waterfront, which the various Transnet pension funds cannot do on their
own, as well as to attract investors. 1
The relevant product market
11. The affected market is the market for the development of waterfront
properties. Si nce this is a transaction involving a restructuring within the
V&A Group, it is not necessary to more specifically define the relevant
market.
Impact on competition
12. There is no change to the status quo arising from this transaction.
Furthermore, no changes will occur to the employment of the union
members or their conditions of employment.
13. However, Transnet is now acquiring an equity stake in the Waterfront itself
which it hitherto did not have. This raises the risk of it restricting the entry
of new entrants who may seek to lease facilities on the Waterfront. The
concern arises since Transnet owns the harbour facility. Therefore, there
is the possibility that Transnet could deny access to the harbour with
respect to a competitor, particularly when it has a direct commercial
interest in the company running the Waterfront operations. The Tribunal
raised this concern with the parties at the hearing. The parties responded
by saying that Transnet up until now controlled 100% of the management
company which effectively ran the harbour and concluded leases with
1 Page 39 Shareholders’ Agreement.
respect thereto, in any event. Therefore, they argue, there is no change –
Transnet will now merely have a minority interest in the Waterfront
complex (26%), effectively reducing its influence on the daily operations of
the Waterfront. It will not dictate to the property company nor get involved
in the management of the waterfront property.
14. There is furthermore no evidence to suggest any collusion with Transnet
and the other pension fund companies having a stake in the Waterfront. The
Tribunal was assured by the parties that Transnet does not control the pension
funds. The trustees for each fund, whether appointed by Transnet or the trade
unions, are committed to their members’ interests. Transnet, in fact, has in the
past competed with the various pension funds for tenants who seek leases at the
Waterfront.
Conclusion
The Tribunal endorses the Commission’s finding that this transaction will not
substantially lessen or prevent competition. Inasmuch as Transnet can elect to
defend its commercial interests in the Waterfront by restricting new entrants
thereto, this merger does not confer any more power than Transnet had pre
merger, by virtue of its ownership of the management company. The Tribunal
therefore approves the transaction unconditionally. There are no public interest
concerns which would alter this conclusion.
_____________ 24 May 2002
N. Manoim Date
Concurring: D.H. Lewis , P. Maponya