COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 01/LM/Jan09
In the matter between:
ApexHi Properties Limited Acquiring Firm
And
Business Venture Investments No. 1232 (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member) N Manoim, (Tribunal Member),
and Y Carrim (Tribunal Member)
Heard on : 25 February 2009
Order Issued : 26 February 2009
Reasons Issued: 11 June 2009
Reasons for Decision
Approval
[1] On 26 February 2009, the Tribunal conditionally approved the merger between
ApexHi Properties Limited and Business Venture Investments No. 1232 (Pty)
Ltd. The reasons for approving the transaction with conditions follow.
The parties
[2] The primary acquiring firm is ApexHi Properties Limited (“ApexHi”), a public
company incorporated under the company laws of the Republic of South Africa
and is listed on the JSE Securities Exchange. ApexHi is not controlled by any
single shareholder but controls ApexHi Charitable Trust. The major
shareholders in ApexHi are Old Mutual Group Limited (with 8.18% A Units;
12.42% B Units; and 11.38% C Units); Outward Investment (Pty) Ltd (with
7.21% A Units; 17.86% B Units; and 3.51% C Units); Coronation (with 6.50% A
Units); Investec Limited (with 5.48% A Units; 5.47% B Units; and 6.15% C
Units); and Clearwater Property Holdings (Pty) Ltd (with 23.62% C Units).
[3] The primary target firm is Business Venture Investments No. 1232 (Pty) Ltd
(“Business Venture”), a private company incorporated in accordance with the
company laws of the Republic of South Africa. Business Venture is controlled
by Cape Empowerment Trust Limited (“Cape Empowerment”). Business
Venture does not control any firm. Its only asset is the 21.8% non-controlling
interest in Ambit Properties Limited (“Ambit”).
Description of the transaction
[4] In terms of the proposed transaction, ApexHi intends to acquire the entire
issued share capital of Business Venture from Cape Empowerment. As a result
of this acquisition, ApexHi will indirectly acquire the 21.8% share of business
Venture in Ambit. The parties submitted that ApexHi is also acquiring 13% of
the shareholding in Ambit from various shareholders. Upon completion of the
transaction, ApexHi will control business Venture and will have 34.8%
shareholding in Ambit, being the 21.8% it holds through Business Venture and
13% it will acquire directly from shareholders in Ambit.
THE PARTIES’ ACTIVITIES
Primary acquiring firm
[5] ApexHi is a property loan stock company, which owns a portfolio of properties
comprising offices, retail, industrial and residential properties. It is listed on the
JSE Securities Exchange in the “Financial Services-Real Estate” sector.
Primary target firm
[6] Business Venture is an investment holding company, which was created by the
Cape Empowerment Trust solely to hold 21.8% interest in Ambit, the only
interest it holds. The parties and the Commission refrained from considering
the activities of Ambit in the assessment of this transaction as they contend that
Business Venture does not control Ambit.
Rationale for the transaction
[7] ApexHi submitted that this transaction provides it with indirect exposure to a
sizeable portfolio of properties that is complimentary to ApexHi’s existing
portfolio.
[8] For Business Venture, the sale of the shares in Ambit was due to the
opportunity offered to de-gear Business Venture’s balance Sheet. The merger
parties submitted that since the asset being disposed of was the most geared
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of Cape Empowerment Trust’s assets, the latter found it more logical to accept
ApexHi’s offer in light of the current economic conditions.
Competition analysis
[9] The Commission found that there is no overlap in the activities of ApexHi and
Business Venture, as Business Venture does not have any business activity
except for its non-controlling stake in Ambit. The Commission acknowledged
that there may be overlaps in the activities of ApexHi and Ambit but refrained
from analysing the extent and effect of the overlap as it argued that post
merger ApexHi shall not have control or influence over Ambit. Moreover, so the
Commission argues, ApexHi has made its intentions clear that it intends to
acquire control over Ambit, only at that time shall ApexHi’s stake in Ambit be
analysed to determine its impact on competition.
[10] At the hearing, the Tribunal raised its concerns that the information was
insufficient to warrant a conclusion that post merger ApexHi will not have
control over Ambit because prima facie it seemed like ApexHi will exercise
control over Ambit prior to ApexHi acquiring control over Ambit in a forthcoming
transaction to be notified. This was because post merger ApexHi would be one
of the largest shareholders in Ambit through its post-merger 34.8% interest in
Ambit together with ABSA which has an interest of just under 35%. In addition,
there was no analysis that was done to clearly show that post merger ApexHi
shall not have control over Ambit and no analysis was done to determine the
impact on competition should control be exercised by ApexHi over Ambit. To
address the Tribunal’s concerns, the parties informed the Tribunal that they
would not object to the transaction being approved with conditions that ApexHi
will not exercise control over Ambit at all and that should control be found to be
exercised, then ApexHi will be compelled to divest its interest in Ambit.
exercised, then ApexHi will be compelled to divest its interest in Ambit.
Subsequent to the hearing the Tribunal issued an order on 26 February 2009,
attached hereto as Annexure “A”, to address the concerns it raised with the
parties.
Public Interest
[11] There are no public interest issues.
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Conclusion
[12] The merger is approved with conditions for the reasons mentioned above.
________________ 11 June 2009
N Manoim DATE
Tribunal Member
D Lewis and y Carrim concurring.
Tribunal Researcher : R Kariga
For the merging parties: Vani Chetty Competition Law (Pty) Ltd
For the Commission : M Van Hooven (Mergers and Acquisitions)
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