COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 67/LM/AUG06
In the matter between:
Pangbourne Properties (Pty) Ltd Acquiring Firm
And
Calulo Property Fund Ltd and Others Target Firm
______________________________________________________________
Panel : DH Lewis (Presiding Member), N Manoim (Tribunal
Member), and Y Carrim (Tribunal Member)
Heard on : 11 October 2006
Decided on : 11 October 2006
REASONS FOR DECISION
Approval
[1]. On 11 October 2006, the Tribunal unconditionally approved the
proposed merger between the abovementioned parties. The reasons for the
decision follow.
Parties
[2]. The acquiring firm is Pangbourne Properties Limited (“Pangbourne”), a
company listed under the real estate sector of the JSE. Pangbourne is not
directly or indirectly controlled by any firm. It also submitted by the parties that
Pangbourne is not controlled by any single entity. Pangbourne has 43%
interest in Siyathenga Property Fund Ltd (Siyathenga) and it also has 37%
interest in iFour Properties Ltd (iFour) 1.
[3]. The primary target firms are Calulo Property Fund Ltd (“Calulo”), Calulo
Asset Management (Pty) Ltd (“CAM”) 2 and Calulo Property Management
1 Siyathenga’s subsidiaries are as follows: Siyathenga Properties One (Pty) Ltd; Siyathenga
Properties Two (Pty) Ltd and Siyathenga Properties Three (Pty) Ltd. IFour controls the
following firms: Sipan 1 (Pty) Ltd; iFour Properties SA (Pty) Ltd; iFour Properties Two (Pty)
Ltd and iFour Properties Three (Pty) Ltd
2 The shareholders of CAM are: Calulo Properties (Pty) Ltd 37.5%, Adam Lee Morze 50%
and Richard John Harman 12%
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(Pty) Ltd (“CPM”) 3. No entity directly or indirectly controls Calulo. The
shareholders of Calulo are Micawber 398 (Pty) Ltd (“Micawber 398”) 4, which
holds 18%, and Matemuka Property Acquisitions 104 (Pty) Ltd (“ Matemuka”),
which holds 40.6% interest. It is submitted by the parties that individual
members of the public who are all minority shareholders hold the remaining
interest, being 41.4%.
The Proposed Transaction
[4]. This transaction involves the acquisition by Pangbourne of a 40.6%
interest in Calulo comprising of a unit holding 36 641 418 linked units 5 held in
Calulo from Matemuka. As part of an indivisible component of the transaction,
Pangbourne is also acquiring 100% of the issued share capital in CAM and as
part of a further component of the transaction, Pangbourne is acquiring 100%
of the enterprise (comprising the property management of the property
portfolio of Calulo) of Calulo from the controlling firms of CPM. 6
The Rationale of the Transaction
[5]. The Calulo acquisition is in line with Pangbourne’s strategy to invest in
specialised funds and, more particularly, in this instance to establish a
specialised office fund. The size of the transaction will allow Pangbourne to
achieve the critical mass required to take advantage of its PROPS
Commercial Mortgage Backed Securitisation Programme and enable
Pangbourne to reduce its cost of capital in line with its strategy of growth
distributions.
Parties’ Activities
[6]. The acquiring firms are property loan stock companies listed on the
JSE limited under the FinancialReal Estate category. Pangbourne, iFour and
Siyathenga have a portfolio of industrial, commercial and retail properties.
Calulo is a variable loan stock company listed on the JSE under Financial
Real estate category, which owns investments in properties through its wholly
Real estate category, which owns investments in properties through its wholly
owned subsidiary, Calulo Property Investments (Pty) Ltd.
[7]. Calulo is a variable loan stock company listed on the JSE under the
Financial Real Estate category, which owns investments in properties through
its wholly owned subsidiary, Calulo Property Investment (Pty) Ltd and its
3 The shareholders of CPM are: Calulo Properties (Pty) Ltd 50% and. Bornfree Investment 207 (Pty)
Ltd 50%
4 Micawber 398 is a wholly owned subsidiary of Calulo Properties (Pty) Ltd
5 A linked unit is made up of an ordinary share of one cent and one debenture of 199 cents
and the two components must be traded as an individual share. See page 144 of the record.
6 For a list of properties Pangbourne will control as a result of this transaction see page 34 of
the Commission’s Report.
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property portfolio comprises of the following; light industrial property, office
property and retail property. CAM is a property asset management company
and CPM is a property is a property management company. According to the
parties both the asset management services of CPM are provided inhouse
only in respect of Calulo Property Portfolio 7.
Relevant Product and Geographic Market
[8]. The relevant product market is the market for Grade A and B office
properties as well as light industrial properties. The Commission also found
that there is a geographic overlap between the merging parties in respect of
Grade A offices in the Bryanston node; Grade A offices in the Sunninghill
node and Grade B offices in the Bloemfontein node. It was submitted by the
parties in their filing 8 that the acquiring firm does not have any light industrial
properties in the areas where the target firm’s light industrial properties are
situated and as a result the Commission did not consider light industrial
properties any further as there is no geographic overlap in the activities of the
merging parties.
Competition Analysis of the Merger
[9]. The Commission’s investigation revealed that the merging parties
would enjoy a combined post merger market share of 6.6% in the market for
Grade A office space in Sunninghill node. The Commission’s investigation
further found that the merging parties would enjoy a combined post merger
market share of 3.1% in the market for Grade A office space in the Bryanston
node and a market share of 9.23% for Grade B office space in the
Bloemfontein node. The Commission also found that there are other property
owning companies 9 in the relevant nodes that compete with the merging
firms. The market share remains low and is unlikely to raise any competition
concerns.
Public interest
[10]. No public interests issues arise from the merger.
Conclusion
concerns.
Public interest
[10]. No public interests issues arise from the merger.
Conclusion
[11]. Based on the above the transaction will not result in a substantial
7 For a list of properties owned by Calulo see page 6 of the Commission’s Report.
8 See page 26 and 39 of the record.
9 These propertyowning companies include players such as ApexHi Properties, Acucap
Properties, Capital Property Fund, Growthpoint properties, Hyprop Investment, Paramount
Property Fund and others.
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lessening or prevention of competition in the identified markets and is
accordingly approved unconditionally.
___________________ 11 October 2006
Date
Y Carrim
Tribunal Member
D Lewis and N Manoim concurring.
Tribunal Researcher : J Ngobeni
For the merging parties : Vani Chetty (Edward Nathan Corporate Law
Advisers)
For the Commission : Mogale Mohlala and Kwena Mahlakoana
Mergers and Acquisitions
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