COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 33/LM/Mar09
In the matter between:
ApexHi Properties Limited Acquiring Firm
And
Ambit Properties Limited Target Firm
Panel : D Lewis (Presiding Member) N Manoim, (Tribunal Member),
and Y Carrim (Tribunal Member)
Heard on : 24 June 2009
Order Issued : 24 June 2009
Reasons Issued: 8 October 2009
Reasons for Decision
Approval
[1] On 24 June 2009, the Tribunal unconditionally approved the merger between
ApexHi Properties Limited and Ambit Properties Limited. The reasons for
approving the transaction 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 (“Apex Trust”) and
Business Venture Investments 1232 (Pty) Ltd (“Business Venture”). 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 Ambit Properties Limited (“Ambit”), a public company
listed on the JSE Securities Exchange. Ambit is not controlled by any single
shareholder. Its major shareholders and the respective percentage units they
hold are ApexHi Properties Limited (34.8%) 1; ABSA Commercial Property
Finance (34.57%); Outward Investments (Pty) Ltd (9.25%), and Oasis Crescent
Management (2.33%).
Description of the transaction
[4] The proposed transaction occurs by way of a scheme of arrangement between
ApexHi, Ambit and Ambit Management Services (Pty) Ltd (“AMS”). In terms of
the first arrangement, ApexHi intends to increase its 34.8% shareholding in
Ambit to 100% by acquiring all linked units. In terms of the second
arrangement, ApexHi intends to take cession of AMS’ asset management
agreement (“AMS Agreement”) with Ambit from AMS.
[5] At the conclusion of the transaction, ApexHi will solely control Ambit and AMS’
asset management contract of Ambit will be undertaken by Madison Property
Fund Managers (“Madison”) pursuant to Madison’s existing asset management
contract with ApexHi.
THE PARTIES’ ACTIVITIES
Primary acquiring firm
[6] ApexHi is a property loan stock company, which owns a portfolio of properties
comprising offices, retail, industrial and residential properties throughout South
Africa. It is listed on the JSE Securities Exchange in the “Financial Services-
Real Estate” sector. The existing ApexHi Property Portfolio comprises mostly
retail and office space with a small portion of industrial space. The majority of
ApexHi’s properties are geographically located in the Gauteng region. ApexHi
does not conduct its own asset management as this function is outsourced to
Madison.
Primary target firm
[7] Ambit is also a property loan stock company, which owns a portfolio of
properties comprising offices, retail and industrial properties throughout major
metropolitan areas in South Africa. ambit has a sectorally diversified portfolio
with a bias towards office space.
1 This was as a result of the merger between ApexHi Properties Limited and Business Venture
1 This was as a result of the merger between ApexHi Properties Limited and Business Venture
Investments that was conditionally approved by the Tribunal on 26 February 2009 under case
number 01/LM/Jan09. The conditions prohibited ApexHi from exercising any form of control
over Ambit.
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Rationale for the transaction
[8] ApexHi submitted that this transaction is in line with its strategy of increasing its
stake in Ambit should an opportunity arise. The acquisition further provides
ApexHi with an indirect exposure to a portfolio that is complementary to its
existing property portfolio.
[9] For Ambit, the proposed transaction helps it to avoid the consequences of
Ambit remaining with two significant unit holders, ABSA and ApexHi, who may
have different initiatives in their investment in Ambit. Ambit further submitted
that the offer was very attractive and Ambit was a willing seller.
The relevant market
[10] There is an overlap in the activities of the parties with respect to rentable office,
rentable industrial and rentable retail properties. The Commission and the
parties submitted that the relevant product and geographic markets 2 are the
market for Rentable grade A office space in Johannesburg CBD Node;
Rentable grade B office space in Greater Johannesburg Area Node and
Centurion Node; Rentable light industrial property in Jet Park Node and
Welkom Node; and Rentable local convenience centre in Johannesburg CBD
Node and Randburg Node.
Competition analysis
[11] We now turn to analyse the relevant geographic markets in greater detail
below.
Rentable A Grade office property
[12] The Commission submitted that ApexHi has a market share in the rentable
grade B office space of approximately 1%, and Ambit has a market share of
approximately 4%. The parties’ combined post-merger market share will be
approximately 5%.
Rentable grade B office properties
2 Based on information from IPD and the South African Property Owners’ Association
(“SAPOA”), and previous Tribunal decisions, the Commission and the parties concluded that
the geographic market is local.
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[13] In the Greater Johannesburg Node ApexHi has a market share of
approximately 9% in the market for grade B office properties, and Ambit has a
market share of approximately 5%. The post merger market share will be
approximately 14%. At the hearing the parties submitted that they only have a
combined of 5 properties and they will continue to face competition from other
market participants like Growthpoint, and Old Mutual.
[14] In the Centurion Node, ApexHi has a market share of approximately 2% and
Ambit has a market share of approximately 4%. The parties combined post
merger market share is approximately 6%.
Rentable light industrial properties
[15] In the Jet Park Node, ApexHi has a market share of approximately 2% in the
market for light industrial properties while Ambit has approximately 4% . The
combined post merger market share will be approximately 6%, which is
insignificant to raise competition concerns.
[16] In the Welkom Node, ApexHi has a market share of approximately 1% and
Ambit has a market share of 4%. The combined post merger market share will
be approximately 5%.
Conclusion on the overlaps
[17] Combined market shares do not exceed 6 % in any of the markets considered.
On this basis the transaction is unlikely to lead to a substantial prevention or
lessening of competition.
Rentable retail space properties
[18] In the rentable retail convenience space in the Johannesburg CBD Node,
ApexHi has a market share of approximately 3%, and Ambit has approximately
2%. The post merger market share of the merged entity will be approximately
5%, which is insignificant to raise competition concerns.
[19] In the Randburg Node, ApexHi has a market share of approximately 1% and
Ambit has approximately 1%. The post merger market share will be
approximately 2%.
Public Interest
[20] There are no public interest issues.
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Conclusion
[21] The merger is approved unconditionally as it does not lead to a substantial
prevention or lessening of competition as shown above. In addition, there are
no public interest issues.
________________ 8 October 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 : L Madihlala and L Khumalo (Mergers and Acquisitions)
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