COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 78/LM/Sep06
In the matter between:
Dipula Property Investment Trust Acquiring Firm
And
Outward Investment (Pty) Ltd Target Firm
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 8 December 2006
Decided on : 8 December 2006
Reasons Issued: 18 December 2006
Reasons for Decision
Approval
1] On 8 December 2006 the Tribunal issued a merger clearance certificate
unconditionally approving the merger between Dipula Property Investment
Trust and Outward Investment (Pty) Ltd. The reasons for approving the
transaction follow.
The Parties
2] The primary acquiring firm is Dipula Property Investment Trust (‘Dipula Trust’),
a trust formed in accordance with the laws of South Africa. Dipula Trust is a
newly formed entity that is controlled by its trustee, Dipula Property Fund
(‘Dipula Fund’), also a newly formed entity. Both Dipula Trust and Dipula Fund
are currently not trading. Dipula Fund is jointly controlled by Dijalo Property
Services (Pty) Ltd (‘Dijalo’) and Redefine Income Fund Limited (‘Redefine’) with
51% and 49% respective interests in Dipula Fund. No single firm controls
Redefine.1
3] The primary target firm comprises the immovable properties and property
letting enterprises conducted in respect of such properties owned by Outward
Investment (Pty) Ltd (‘Outward’), a wholly owned subsidiary of Redefine.
Rationale for the transaction
4] Both Redefine and Djjalo view the proposed transaction as an opportunity to
create a black majority owned property fund.
The Transaction
5] This transaction involves the acquisition as a going concern by Dipula Trust of
various properties owned by Outward. Dijalo and Redefine will initially form the
Dipula Trust, which will be used as a special purpose vehicle for the acquisition
of the acquired properties. 2 The properties are acquired in one indivisible
transaction.3
6] The end result of the transaction is that Dipula Trust will own and control the
acquired properties. Dijalo and Redefine will have 51% and 49% respective
interests in Dipula Fund, the ultimate controller of Dipula Trust. The following
are the pre and postmerger structures:
1 The major stakelders in Redfine are Stanlib Property Fund with 18% shareholding, The
Standard Bank of South Africa Limited with 8% shareholding, Old Mutual with 13%
shareholding and Investec Property funds with 6% shareholding in Redefine.
2 See record p18 for a complete list of the properties being acquired by Dipula Trust.
3 Record p16.
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The parties’ activities
The Primary Acquiring Firm
Dipula Trust
7] Dipula Trust is a newly incorporated entity that, together with its newly
incorporated trustee, Dipula Fund, has not commenced trading.
Dijalo
8] Dijalo, one of the ultimate controllers of Dipula Trust in terms of this merger, is
involved in property management services but does not own any properties.
Redefine
9] Redefine, one of the ultimate controllers of Dipula Trust in terms of this merger,
is a major property investment fund that owns and lets office, retail and
industrial properties.
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The primary target firm
10] Outward, a wholly owned subsidiary of Redefine, is involved in the provision
rentable grade A office space, retail space and industrial space.
Overlapping activities
11] In their papers, the parties submitted that there is an overlap in the activities of
the merging parties. However, at the hearing they conceded that there is no
real overlap since Redefine owns 100% of the properties prior to this
transaction and is now selling them and will consequently own 49% via Dipula
Trust.4 Indeed, a careful analysis of the current transaction leaves one with
the inescapable conclusion that there is no overlap because this transaction
involves the introduction of two new entities namely Dipula Fund and Dipula
Trust in certain commercial property letting business of the Redefine Group
owned by Outward. These entities do not own or control any property owning
and letting enterprises. Dijalo, one of the ultimate owners of Dipula Trust, is
involved in property management and does not own or control the properties it
administers. The only property portfolio that is of essence for the purposes of
the current transaction is the one housed in and being acquired from Outward.
As a result there is no horizontal product overlap in the activities of the parties.
12] This transaction gives rise to vertical integration in that Dijalo is involved in the
property management business and Dipula Trust will be involved in the
upstream activity of ownership and letting of properties. The Commission
defined the market as the national market for the provision of property
management services. It is not necessary to analyse the market in this instance
since Dijalo has less than 1% market share. This percentage is small and does
not raise competition concerns. Furthermore, there are other major property
not raise competition concerns. Furthermore, there are other major property
management services companies that will continue competing with the merging
firms postmerger. These include, among others, Broll Property services,
Gensec, JH Isaacs, Colliers, RMB Properties
4 Transcript p3.
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Public Interest Issues
13] There are no public interest issues.
Conclusion
14] The transaction will not lead to a substantial prevention or lessening of
competition and is accordingly approved. Moreover, there are no public interest
concerns that may affect this conclusion.
________________ 18 December 2006
N Manoim DATE
Tribunal Member
Y Carrim and M Mokuena concur in the judgment of N Manoim.
Tribunal Researcher: R Kariga
For the merging parties: J Katz, Edward Nathan Sonnenbergs Attorneys
For the Commission : F Ngobese and H Ratshisusu (Mergers and
Acquisitions)
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