COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 27/LM/Apr05
In The Large Merger Between:
Growthpoint Properties Limited
And
Tresso 119 (Pty) Ltd
Reasons for Decision
Approval
On the 17 May 2005 the Competition Tribunal issued a Merger Clearance Certificate approving
the transaction between Growthpoint Properties Limited and Tresso 119 (Pty) Ltd. The reasons
for this decision follow.
The Parties
1. The primary acquiring firm is Growthpoint Properties Limited (“Growthpoint”). 1 The primary
target firm is Tresso 119 (Pty) Ltd (“Tresso”). 2
The transaction
2. The transaction involves Growthpoint acquiring a portfolio of immovable properties, 3 as well
as all right, title and interest in and to lease agreements and service and maintenance
contracts in respect of the premises forming part of each of the properties. In terms of the
Sale Agreement, Growthpoint may nominate a purchaser who will take transfer of the
acquisition instead of Growthpoint. In their filing with the Commission, the merging parties
indicated that Growthpoint was investigating the implementation of a securitisation scheme
to fund the acquisition, which would involve the nomination of a trust as a purchaser under
the Sale agreement.
1 A list of the firms, which hold more than 5% of the issued capital of Growthpoint, can be found on page
5 of the Record. A list of the companies controlled by Growthpoint appears at page 40 of the Record.
2 Details of the subsidiaries and associated companies of Tresso appear at page 124 of the Record.
3 A detailed list of the properties to be acquired can be found on pages 279304 of the record as well as
in an updated Appendix attached to correspondence from Jowell Glyn & Marais to the Tribunal dated 11
May 2005.
3. After the Commission’s referral, the Tribunal was informed 4 that the securitisation scheme
would go ahead and that Growthpoint would take transfer of certain of the properties and
that certain of the properties would be transferred to a trust. According to the parties, the
trust was yet to be created and Growthpoint would be the vested capital and income
beneficiary of the trust.
4. At the hearing of the matter on 16 May 2005, the Tribunal was informed that the
documentation relating to the creation of the trust had still not been finalised. The parties,
however subsequently provided the Tribunal with a written undertaking that copies of such
trust documentation will be lodged with the Tribunal as soon as these had been finalised. 5
Rationale for the transaction
5. From Growthpoint’s perspective, the acquisition offers investors geographically and
sectorally diversified exposure to the physical property assets underpinned by longterm,
sustainable, escalating income streams. Growthpoint will also be exposed to the office and
industrial sectors in the Western Cape region.
6. For Tresso, the transaction was motivated by its shareholder’s need for cash, which resulted
in the identification of certain properties, which could be sold.
The Parties’ Activities
7. Both Growthpoint and Tresso are property loan stock companies and hence involved in the
property industry. Both parties derive their income primarily from rentals received from
tenants in properties owned by them. These properties are located throughout South
Africa.6 Growthpoint also derives income from investments. 7
8. The Commission found that parties activities overlapped particularly in the following
markets:
i) Grade A office space in Sandton, Parktown and Midrand;
ii) Grade B office space in Sandton, Parktown and Pretoria CBD; and
ii) Grade B office space in Sandton, Parktown and Pretoria CBD; and
iii) Light industrial property in Johannesburg South and Cape Town.
Impact on competition
9. According to the Commission, the combined market share of the merging parties in all but
one of the above overlapping markets is relatively low. 8 In the market for Grade B office
space in Sandton, the post merger market share is approximately 23%. According to the
Commission, while this figure appears high, the market share data is based on industry data
supplied by the South African Property Owners Association (“SAPOA”), and therefore
4 Correspondence from Jowell Glyn & Marais to the Tribunal dated 11 May 2005.
5 The undertaking was provided on the 16 May 2005.
6 Tresso also owns a hotel and shopping centre in Namibia.
7 See page 264 of the record for a list of the companies Growthpoint holds interest in.
8 See Page 67 of the Commission's Report.
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includes only SAPOA members. If nonmembers’ data is added, the Commission submits
that the merging parties market shares will reduce.
10. The Commission was of the view that no competition concerns arise out of the transaction
as post merger, the merged entity will compete with a number of large property companies
in the identified markets. 9 According to the parties, there also exists significant
countervailing power from tenants, which increases due to the existing oversupply of
commercial property. With regard to industrial warehousing, 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. 10
Conclusion
11. Based on the above, we are satisfied that the transaction will not result in a substantial
lessening of competition in the identified markets. We have no other concerns and are
satisfied that there are no significant public interest issues, which arise, and we accordingly
approve this transaction unconditionally.
9 June 2005
Y Carrim Date
Concurring: U Bhoola and M Mokuena
For the merging parties: I Gaigher (Jowell Glyn & Marais)
For the Commission: E Mtantato (Mergers and Acquisitions)
9 See list on page 7 of the Commission's Report.
10 See pages 275278 of the record.
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