COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 76/LM/Oct04
In The Large Merger Between:
Vukile Property Fund Limited
And
MICC Property Income Fund Limited
Reasons for Decision
Approval
1. On 17 November 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Vukile Property Fund Limited and MICC Property Income
Fund Limited. The reasons for this decision follow.
The Parties
2. The primary acquiring firm is Vukile Property Fund Limited 1 (“Vukile”), a public company
listed on the JSE Securities Exchange South Africa. Vukile is controlled by Sanlam Property
Asset Management (Pty) Ltd, which is ultimately controlled by Sanlam Limited (collectively
referred to as the “Sanlam Group”). Vukile controls Basfour 2776 (Pty) Ltd, Lekup Properties
No.1 (Pty) Ltd and Lekup Properties No. 2 (Pty) Ltd.
3. The primary target firm is MICC Property Income Fund Limited (“MICC”), a public company
which controls MICC Properties (Pty) Ltd and Century Property Holdings (Pty) Ltd.
The transaction
4. Vukile is acquiring 100% of the linked units in MICC. Each linked unit comprises one share
in Vukile indivisibly linked to one debenture in MICC. The offer consideration comprises 12
linked units in Vukile for every 10 linked units in MICC.
Rationale for the transaction
5. Through the acquisition, Vukile will broaden its investor base and thereby improve trading
1 Incorporated as Selcovest 23 (Pty) Ltd. See Selcovest 23 (Pty) Ltd and Basfour 2776 (Pty) Ltd
27/LM/Apr04
since the nature and type of assets currently owned by MICC suit the objectives of the
Vukile property portfolio. The transaction will also provide Vukile with increased exposure in
the Western Cape.
The Parties’ Activities
6. Vukile and its subsidiaries own and lease retail, commercial and industrial properties. The
Sanlam Group has five operational clusters involved in life insurance, short term insurance,
investment, banking and independent financial services. Sanlam Limited owns properties
that represent a mix of retail, commercial and industrial properties. These properties are
leased to a wide range and number of tenants. Sanlam Property Asset Management
performs asset management functions in respect of those properties.
7. MICC is involved in property investment through the direct ownership or lease of immovable
property. MICC owns and leases a variety of commercial, retail and industrial property.
The Relevant Market
The Product market
8. Both parties are active in the property industry. The property market can be segmented into
different types of property (either office, retail, commercial or industrial) depending on the
use for which they will be put, as well as the grade of such property. 2
9. In previous decisions 3 the Tribunal accepted that within the office property segment, the
different grades of office property (grades A, B, C and P) constitute different relevant
product markets. 4 We have also stated previously 5 that within the retail property market,
community shopping centres, neighbourhood shopping centres, local convenience centres,
value centres and shopping malls, constitute different relevant markets. 6 Industrial property
can be divided into light industrial and heavy industrial property. 7
10. The Commission evaluated the properties being acquired and matched them to the existing
10. The Commission evaluated the properties being acquired and matched them to the existing
Vukile and Sanlam portfolio. Broadly, the merging parties' activities overlap in the provision
of Grade A office property, Value Centres, Mini Factory complexes and Distribution
Warehouses.
2 Selcovest supra
3 See Momentum Property Investments (Pty) Ltd and Bonatla Property Holdings Limited , case no. 34/LM/
Jul03.
4 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
without, for example, airconditioning and parking.
5 See Primegro Properties Ltd and Growthpoint Properties Ltd , case no. 29/LM/Jun03.
6 Ibid. property is classified according to the available retail space per square meters, with for example
regional retail property occupying 30 000 60 000 square metres to local convenience retail property
occupying 300 1000 square metres.
7 Supra footnote 5.
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The Geographic market
11. The property market is further segmented into different geographical areas or "nodes". All
areas within that node compete with each other and are substitutable. 8 The Commission, in
its analysis, found that the merging parties' product markets overlap in the following areas:
Grade A office space in the Sandton node
Value centres in Nelspruit
Distribution warehouses in Pinetown
Mini factories in the Randburg Node
Impact on competition
12. The combined postmerger market shares in the two of the relevant markets do not exceed
15%, namely in that for value centers in Nelspruit and distribution warehouses in Pinetown.
Even though in the market for Grade A office space in Sandton and in the market for mini
factories in Randburg the market shares marginally exceed 15%, we are satisfied that the
property market is sufficiently competitive, as there are a number of competitors in those
markets.
Conclusion
13. 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.
10 January 2005
D Lewis Date
Concurring: N Manoim and Y Carrim
For the merging parties: P Coetser (Brink Cohen Le Roux Inc)
For the Commission: E Ramafamba (Mergers and Acquisitions)
8 Selcovest supra
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