COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 86/LM/Aug08
In the matter between
Pinnacle Holdings (Pty) Ltd and Four Others Primary Acquiring firms
And
Acc-Ross Holdings Ltd Primary Target Firm
Panel : D Lewis (Tribunal member); N Manoim (Tribunal member) and
M Mokuena (Tribunal member)
Heard on : 15 October 2008
Decided on : 15 October 2008
Reasons Issued : 24 November 2008
Reasons for decision
Approval
[1] On 15 October 2008 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Pinnacle Point Holdings (Pty) Ltd and Four
Others and Acc-Ross Holdings Ltd unconditionally. The reasons for the approval
appear below.
Parties
[2] The primary acquiring firms are Pinnacle Point Holdings (Pty) Ltd (“Pinnacle
Point”), New Port Finance Company (Pty) Ltd (“New Point”), Property Promotions
and Management (Pty) Ltd (“Property Promotions”), Goldman Asset Management
Ltd (“Goldman Asset Management”) and Rakeen Development PJSc (“Rakeen”),
hereinafter referred to as “the primary acquiring firms”.
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[3] The primary target firm is Acc-Ross Holdings Ltd (“Acc-Ross”). Acc-Ross
controls Acc-Ross Networks (Pty) Ltd (“Acc-Ross Networks”), Gardener Ross
Holdings Ltd (“Gardener Ross”) and Accretio Holdings (Pty) Ltd “Accretio”).
Transaction
[4] In terms of the structure of the transaction, the primary acquiring firms will
collectively acquire 60% share in Acc-Ross. A voting pool agreement will then be
entered into by the primary acquiring firms in terms of which they will each have joint
control in Acc-Ross.
Rationale
[5] The merging parties submit that through this transaction, they will be able to
exploit the benefits of the substantial synergies that exist and cost saving that will be
achieved, thereby increasing shareholder value. Further, the merging parties submit
that this transaction will give the critical mass to finance new projects on more
favourable terms and will provide easier access to large development opportunities
in South Africa and beyond.
Parties Activities
[6] The merging parties are involved in property development. The primary
acquiring firms focus is on developing land residential stands (which often have golf
courses) and resorts. Currently, the primary acquiring firm are engaged in
developing properties in the Free State, Western Cape and Eastern Cape.
[7] The property development activities of Acc-Ross are focused on developing
residential units as well as leisure and resort developments. Acc-Ross is currently
involved in developing property in Gauteng, the Free State, Eastern and Western
Cape.
Competition analyses
[8] There is an overlap in the activities of the merging parties in respect of the
development of residential estates and golf courses. The merging parties’ residential
estate developments are situated in Cape Town. However, the Commission submits
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that there is no geographic overlap as the merging parties respective development
projects are not aimed at the same market.
[9] In this regard, the Commission states that the primary acquiring firms’
development project (i.e. Project Pluto) is low density aimed at the “super rich” and
the stands will sell for between R7 000 000 and R10 000 000. Acc-Ross’ project, (i.e.
Welvergenoegd Development) on the other hand, is a suburban high density
residential development aimed at the middle income primary residential market and
will sell for between R500 000 and R1000 000.
[10] Both merging parties also develop golf estate in the Free State. The primary
acquiring firms’ golf estate is situated in Clarens and the primary target firm golf
estate in Orangeville. The Commission investigated the potential geographic overlap
of these estates and found that they do not serve the same geographic area as they
are approximately 250 km apart.
[11] The transaction also results in a potential vertical integration. This potential
integration occurs in that the Pinnacle Group has developed in-house marketing
capacities which might be used to market the target firm’s residential developments.
However, this integration is unlikely to raise any significant foreclosure concerns as
Acc-Ross’s market share for residential development is less than 1%.
[12] In addition, the merging parties envisage that they will, post-merger, continue
using the services of estate agents and marketing companies to sell stands on their
developments and is accordingly not anticipated that this merger will result in the
foreclosure of such service providers.
Public interest
[13] The transaction does not give rise to any public interest issues and is
accordingly approved without conditions.
___________________ 24 November 2008
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D Lewis Date
Tribunal Member
Concurring: N Manoim and M Mokuena
Tribunal Researcher : I Selaledi
For the merging parties : Cliffe Dekker Hofmeyr Inc
For the Commission : Thabelo Ravhugoni (Mergers and Acquisitions)
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