COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 77/LM/DEC03
In The Large Merger Between:
Investec Property Group Limited
And
Nestlé (South Africa) (Pty) Ltd
Reasons for Decision
Approval
1. On 28 January 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Investec Property Group Limited and Nestl é (South
Africa) (Pty) Ltd. The reasons for this decision follow.
The Parties
2. The primary acquiring firm is Investec Property Group Limited (“Investec Property”), a wholly
owned subsidiary of Investec Property Group Holdings Limited which is ultimately owned by
Investec Limited, a company listed on the Johannesburg Stock Exchange.
3. The primary target firm is Nestl é (South Africa) (Pty) Ltd (“Nestl é”), a wholly owned
subsidiary of the Swiss confectionary company, Nestl é S.A Company, which is listed on the
Swiss stock exchange.
The transaction
4. The transaction, which is a sale and leaseback arrangement, involves Nestl é selling
industrial warehouse space on which its regional head office is located in the Longmeadows
Business Estate in Modderfontein, Johannesburg. In terms of the merger agreement
Investec Property will then lease the property back to Nestl é in its capacity as landlord for a
period of ten years.
The Parties’ Activities
5. Nestlé is engaged in the manufacture, sale and distribution of a broad array of food products
ranging from confectionary (chocolates) to pet foods to instant foods to infant foods.
However it is Nestl é’s immovable property, which is the subject of this transaction. This
property is used as a warehouse and distribution facility exclusively by Nestl é.
6. Investec Property is a property holding company, involved in property management,
property trading and development and property fund management. Investec property owns,
manages and develops properties. Investec Property currently owns two industrial
warehouse properties.
7. The Investec Group provides a wide range of financial products and services, viz.
Investment banking, Treasury and Specialized finance, Private banking and Client portfolio
management and Asset management.
Impact on competition
8. In the Commission’s view, although the properties of Investec Property and Nestl é are both
industrial warehouse facilities, they do not compete in the market for letting industrial
warehouse space. This is because Nestl é’s property was owned and used for its own
purposes.
9. However, as a result of the transaction, Nestl é’s property will now become part of this
broader rentable industrial warehouse property market. Investec’s market share in this
market is currently less than 1%, and with the addition of Nestl é’s property will remain less
than 1%.
10. The Parties submit that this market is very competitive, and tenants will generally tend to
migrate to those premises in any particular area in respect of which they are offered the
most attractive terms. Tenants therefore exercise significant countervailing power.
11. There are no significant barriers to entry other than the need for capital investment. The
Parties further submit that there isn’t any shortage of vacant land available for development
as industrial warehousing space in the market.
Conclusion
12. Having regard to the above, we conclude that the merger will not lead to a substantial
lessening of competition and there are no significant public interest concerns. Accordingly,
we agree with the Commission’s recommendation that the transaction be unconditionally
approved.
2 February 2004
N Manoim Date
Concurring: P Maponya and M Holden
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For the merging parties: Pieter Steyn (Werksmans Attorneys)
For the Commission: Maarten Van Hoven (Mergers and Acquisitions)
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