COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 38/LM/Jul10
In the matter between:
Brodsky Investments (Pty) Ltd
Capital Property Fund Ltd
Resilient Properties (Pty) Ltd
Fortress Income 2 (Pty) Ltd Acquiring Firms
And
Murray and Roberts (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
and Andreas Wessels (Tribunal Member)
Heard on : 29 July 2010
Order issued on : 29 July 2010
Reasons issued on : 04 August 2010
Reasons for Decision
Approval
1] On 29 July 2010, the Competition Tribunal (“Tribunal”)
unconditionally approved a merger between the above mentioned
parties. The reasons for approving the transaction follow.
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The transaction
2] The proposed merger transaction is for Murray and Roberts (Pty) Ltd
(“Murray and Roberts”) to sell 24 of its properties to the acquiring
firms, namely Brodsky Investments (Pty) Ltd (“Brodsky”), Capital
Property Fund Ltd (“Capital”), Resilient Properties (Pty) Ltd
(“Resilient”) and Fortress Income 2 (Pty) Ltd (“Fortress”), as a single
indivisible transaction.
3] For notification purposes, the Tribunal viewed the transaction as one.
In reality however, the Transaction comprises of four separate
purchase agreements. The acquiring firms formed a consortium in
order to make an offer of purchase to Murray and Roberts and then
upon acceptance of this offer, to divide up the properties amongst
themselves accordingly.
The parties and their activities
4] The primary acquiring firms are Brodsky, Capital, Resilient and
Fortress, companies incorporated under the company law of the
Republic of South Africa.
5] All the acquiring firms own properties and lease space to tenants to
generate income.
6] Brodsky is controlled by Spiros Noussis and neither it nor its
controlling firm control any other firm.
7] Capital controls in excess of sixteen subsidiaries and is managed by
Property Fund Managers Ltd.
8] Resilient, a company that does not control any firm, is a wholly
owned subsidiary of Resilient Property Income Fund Ltd (“RES
Listco”), a public entity listed on the JSE and with numerous
shareholders. RES Listco controls in excess sixteen subsidiaries. All
these entities will be referred to as the Resilient group.
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9] Fortress is a wholly owned subsidiary of Fortress Income Fund Ltd
(“FOR Listco”) which is not controlled by any single shareholder and
which itself controlled 5 subsidiaries. 1 All these entities will be
referred to as the Fortress Group.
10] The primary target firms are 24 properties owned by Murray and
Roberts. Murray and Roberts is a wholly-owned subsidiary part of the
Murray and Roberts Group.
11] The primary target firm is involved in engineering, construction and
properties for the purpose of generating rental income.
The relevant market and the impact on competition
12] There is an overlap in properties that Capital owns and those which it
will acquire in respect of the provision of letting light industrial space
in the Epping/Airport/Langa node, Western Cape. The combined
market share post the merger transaction is less than 25% with a
very low increment. Further, the merged entities will be faced with
effective competition from competitors such as Old mutual, Apexhi,
Growthpoint, Sanlam, Investec, Emira Property Fund and Public
Investment Corporation.
13] There is also an overlap in B grade office space in the Randburg
node, Gauteng, with regards to property Fortress owns and that
which it will acquire from Murray and Roberts. The combined market
share post the merger transaction is below 5%. This is unlikely to
neither give Fortress any form of market power nor affect competition
negatively.
14] The overlaps therefore raise no concerns.
Public interest
1 Fortess Income 1 (Pty) Ltd, Fortess Income 2 (Pty) Ltd, Fortess Income 3 (Pty) Ltd, Fortess Income 4
(Pty) Ltd, Fortess Income 5 (Pty) Ltd.
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15] Initially, the merger would have resulted in the target firms
retrenching 20 employees. 11 of these employees are skilled
employees, 7 are semi-skilled employees and 2 are unskilled
employees.
16] After the Commission communicated their concerns in this regard,
the acquiring firms indicated that they will employ the 20 affected
individuals on new employment contracts.
Conclusion
17] The merger therefore does not raise any public interest concerns and
is unlikely to substantially prevent or lessen competition.
____________________ 04 August 2010
Norman Manoim DATE
Yasmin Carrim and Andreas Wessels concurred.
Tribunal Researcher : Mahashane Shabangu
For the Merging parties : Cliffe Dekker Hofmeyr
For the Commission : Mogalane Matsimela
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