COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 80/LM/DEC03
In The Large Merger Between:
Growthpoint Properties Limited
And
100 Grayston Drive Property (Pty) Ltd
Block E Power Station Properties (Pty) Ltd
Reasons for Decision
Approval
1. On 04 February 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Growthpoint Properties Limited and 100 Grayston Drive
Property (Pty) Ltd and Block E Power Station Properties (Pty) Ltd. The reasons for this
decision follow.
The Parties
2. The primary acquiring firm is Growthpoint Properties Limited (“Growthpoint”), a property loan
stock company listed on the Johannesburg Stock Exchange under the “real estate holding
and development” sector. Growthpoint is currently managed by Growthpoint Managers (Pty)
Ltd, which has in turn appointed Investec Property Group limited to administer Growthpoint’s
portfolio of properties on its behalf.
3. The primary target firms are 100 Grayston Drive Property (Pty) Ltd (“Grayston”) and Block E
Power Station Properties (Pty) Ltd (“Block E”). Both firms are wholly owned subsidiaries of
Investec Employee Benefits Limited (“IEB”), which is ultimately controlled by Investec
Limited. However, in an interlinked transaction, IEB has disposed of the entire issued share
capital of both target firms to Basfour 2885 (Pty) Ltd (“Basfour”). Basfour is a special
purpose vehicle, wholly owned by Yonbor Nominees (Pty) Ltd. 1
The Transaction
4. This is the 2 nd phase of a twophased deal. In the 1 st phase, as stated above, IEB sold
1 This transaction was categorized as an intermediate merger and is currently under investigation by the
Competition Commission.
100% of the issued share capital in the target firms to Basfour. In this, the 2 nd phase,
Growthpoint will acquire the assets of the target firms namely:
• The immovable property upon which Investec conducts its business in Sandton,
Johannesburg, namely, the “Sandton Head office”, and in Cape Town, the “Investec
Cape Town Building”.
• The 40,5% interest Grayston has in Merchant Place Parkade share block (Pty) Ltd
(“Merchant Place”) which owns the property adjacent to the Sandton Head office, which
is used as a parking garage for Investec employees, namely, the “Merchant Place
Parkade”.
5. Growthpoint will then lease back the target properties to Investec Bank Limited for a period
of 20years.
The Parties’ Activities
6. Growthpoint is a property holding company, which derives its income from rentals received
from tenants, as well as from investments in other property loan stock companies.
Growthpoint’s physical property portfolio is diversified, with 122 retail, industrial, commercial
and warehouse properties comprising approximately 1,4 million m 2 located throughout
South Africa and Namibia.
7. Grayston receives rentals from tenants in the Sandton Head office as well as rentals from
tenants of 580 parking bays in the Merchant Place Parkade, by virtue of its interest in
Merchant Place.
8. Block E receives rentals from tenants in the Investec Cape Town building, which is also
graded as Grade P office space.
The Relevant market
9. The Commission identifies the relevant product market as that of Grade P office space . In
Growthpoint Properties Ltd and Primegro 2, the Tribunal accepted the different product
markets within the property industry according to grades:
“Office properties are subdivided into different classes, for example grade P, A, B, or C Office
Property”. 3
Property”. 3
10. The Commission identified the relevant geographic market as local in the Sandton node .4
The Sandton node consists of: Sandton CBD, Rivonia, Illovo, Houghton, Melrose, Hyde
Park, Rosebank and Bryanston.
2 29/LM/Jun03
3 ibid. at Page 2. “... Office Property is graded according to the age of a building, the quality of the office
accommodation, parking and other finishing touches to building with grade P being a top quality property
and C an older building without, for example, airconditioning and parking...” at Footnote 3.
4 The parties and the Commission based their geographic market analysis on the different nodes as
identified by the South African Property Owners Association ("SAPOA"), which are used by all
participants in the industry.
2
11. The Sandton Head office and the Investec Cape Town Building are both graded as Grade P
office space. However, while the former is located in the Sandton node, the latter falls within
a different geographic area, viz. Cape Town.
12. Since Growthpoint owns one Grade P office property in Illovo, there is an overlap in respect
of the identified relevant market, i.e. Grade P Office space in the Sandton node.
Impact on competition
13. The acquisition of the target properties will increase Growthpoint’s total asset base.
However, since SAPOA’s data are only based on the Grade A market, no accurate market
shares are available, in respect of the Grade P market, and the impact the acquisition is
likely to have on Growthpoint’s market share in this market. The parties, however, in their
competitiveness report, submit that Growthpoint’s market share in the relevant market will
increase from 4% to 6.25%.
14. The parties further cite at least 9 new entrants to the relevant market in the past three years.
This indicates that barriers to entry are low.
15. According to the Commission, the transaction does not change the characteristics of the
market in which Growthpoint competes. The target properties were previously leased by
Investec from Grayston, which was a subsidiary of the Investec Group. This lease
agreement (with Growthpoint being the landlord) is being maintained for a 20year period.
Since Investec negotiated its own lease agreement, prior to the transaction, it is highly
unlikely to be prejudiced by the transaction.
16. As stated above, Growthpoint’s property portfolio is administered by Investec Property
Group and accordingly does not have any employees. Neither of the target firms have any
employees, as the administration of the properties is currently performed by Investec Bank
employees, as the administration of the properties is currently performed by Investec Bank
Limited being the employer of all the staff performing the property administration of the
target firms. There are therefore no employment losses attributable to the merger.
Conclusion
17. Having regard to the above, we conclude that the merger will not lead to a substantial
lessening of competition and there are no public interest concerns. Accordingly, we agree
with the Commission’s recommendation that the transaction be unconditionally approved.
6 February 2004
D Lewis Date
Concurring: N Manoim and U Bhoola
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For the merging parties: Elmarie Barnard (Jowell Glyn Marais)
For the Commission: Maarten Van Hoven (Mergers and Acquisitions)
4