COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 22/LM/May10
In the matter between:
Acucap Properties Ltd Acquiring Firm
And
Attfund Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Andreas Wessels (Tribunal Member) and
Medi Mokuena (Tribunal Member)
Heard on : 15 July 2010
Order issued on : 15 July 2010
Reasons issued on : 24 August 2010
Reasons for Decision
APPROVAL
1] On 15 July 2010 the Competition Tribunal (the “Tribunal”) unconditionally
approved the acquisition between Acucap Properties Ltd and Attfund Ltd. The
reasons for approval follow below.
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PARTIES TO THE TRANSACTION
2] The primary acquiring firm is Acucap Properties Limited (“Acucap”), a
company incorporated in accordance with the laws of the Republic of South
Africa. Acucap’s major shareholders are Nedbank Ltd (6.58%), Thesele
Group (5.32%) and Government Employee Pension Fund (14.02%). Acucap
directly controls Acucap Investments (Pty) Ltd, Acucap Property Management
(Pty) Ltd, Sycom Property Fund Managers Ltd (“Sycom Managers”) and
Atlas Properties Ltd.
3] Through Atlas, Acucap controls Advent Properties (Pty) Ltd, Acucap
Management Services (Pty) Ltd and Atlas Property Developments (Pty) Ltd.
Through Sycom Property Fund Managers Acucap controls Sycom Property
Fund Collective Investment Scheme in the Property Portfolio (“Sycom Fund”),
FC Property Management Company (Pty) Ltd, Somerset Mall Property
Management Company (Pty) Ltd, Woodlands Office Park Property
Management Company (Pty) Ltd, Tyger Hills Office Park (Pty) Ltd and
CCG097 Share Block Company (Pty) Ltd.
4] The primary target firm is Tyger Hills Office Investments (Pty) Ltd (“Tyger
Hills”), which is owned by Attfund Ltd (“Attfund”). Attfund is a public company
listed on the JSE and as such is not controlled by any individual shareholders.
Attfund controls Tyger Hills, SA Value Marts (Pty) Ltd, Glenwood Office
Investments (Pty) Ltd, Fullimput 160 (Pty) Ltd, Atterbury Deco Centre Ltd,
Formprops 1 (Pty) Ltd, Glenfield Property (Pty) Ltd, Movies at Woodlands
(Pty) Ltd and Pubus One Share Block Company (Pty) Ltd.
DESCRIPTION OF THE TRANSACTION
5] In terms of the sale of shares agreement entered into by the merging parties,
Acucap intends to acquire the entire issued share capital of Tyger Hills, which
includes the immovable property known as Phase 3, Phase 5 and Phase 6.
On completion, Tyger Hills will be solely controlled by Acucap.
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ACTIVITIES OF THE PARTIES
6] Acucap is a property loan stock company listed on the JSE Ltd in the “Real
Estate-Real Estate Holdings & Development” sector. Acucap Group’s
Property Portfolio, which includes the Sycom Fund 1 Property Portfolio,
comprises investments in properties in the retail, commercial office and
industrial space sectors of the property market. These properties are located
in various areas throughout South Africa including Gauteng, Kwazulu Natal,
the Eastern Cape and the Western Cape Provinces. Acucap, through Sycom
Fund, owns a grade “A” office property situated in Parow, Western Cape.
7] Acucap also performs asset management functions for its own properties.
The parties further indicated that Acucap outsources certain other property
management functions to third parties on an arm’s length basis.2
8] Attfund is also involved in the property market. It owns a portfolio of
commercial property in the rentable office space and rentable retail space in
Gauteng and Western Cape. The primary target firm, Tyger Hills Office Park,
comprises of a rentable “A” grade office properties located in Parrow,
Western Cape Provinces.
RATIONALE FOR THE TRANSACTION
9] Acucap submitted that this transaction presents it with an opportunity to bring
good quality office space in Cape Town to the Acucap property portfolio. The
rationale for Attfund is that it wishes to focus on a more retail oriented
portfolio and is therefore disposing its office park, which is no longer its core
business.
1 The merging parties have submitted that Sycom Fund purchased all the shares and claims
in Tyger Hill Office Park which included the immovable property known as Phase, 1, 2 and 4.
This transaction was approved by the Tribunal on 08 March 2010.
2 According to the parties, Acucap outsources these property management functions when it
does not have the required infrastructure to effectively conduct such functions.
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COMPETITION ANALYSIS
10] There is an overlap in the activities of the merging parties in respect of
rentable grade “A” office space in Cape Town, Western Cape. The
Commission noted that the South African Property Owners Association’s
(“SAPOA”) report does not define Parow as a node. Further, the Commission
noted that Parow is 3 km away from the Bellville node and that these two
areas are located on the same road, namely Voortrekker Road. The
Commission therefore concluded that for the purposes of the present
transaction, Parow forms part of the Bellville node. The merging parties’
combined post merger market share in the Bellville node is approximately 9%.
11] There is also a vertical relationship between the activities of the merging
partied in that Acucap acquired the property management business relating to
Tyger Hills from Parkdev, an asset manager of Attfund. The Commission
found that the parties would have a combined post merger market share of
approximately 7% for the provision of asset management services.
Competitors in this market include Growthpoint, Old Mutual Group, Redefine,
Pangbourne Properties, Sanlam Properties Resilient and many others.
12] The Commission’s investigations also found that the property market is
characterised by cross shareholdings and cross directorships. The
Commission further found that property managers or asset managers
manage different properties owned by competing firms. In the instant
transaction, the cross directorship is between Sycom and Attfund i.e. three
executive directors sit on both Attfund and Sycom boards. The merging
parties submitted that post merger, these executive directors will resign from
the Sycom board, with the exception of one non-executive director who will
still remain on both boards.
13] The merging parties further submitted that in the event of a conflict of interest
13] The merging parties further submitted that in the event of a conflict of interest
arising, i.e. where the non-executive director becomes aware of strategies
which may overlap with their own firms’, that director would in such a situation
note their interest and either recuse themselves or not vote on the matter at
hand.
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14] In light of the above, we agree with the Commission that the proposed
transaction is unlikely to result in or enhance coordination in the relevant
markets. Further, the proposed transaction is unlikely to result in a substantial
lessening or prevention of competition as the merging parties’ post merger
market shares remain low.
CONCLUSION
15] There are no significant public interest issues and we accordingly approve the
transaction.
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____________________ 24 August 2010
Norman Manoim DATE
Andreas Wessels and Medi Mokuena concurring.
Tribunal Researcher: Ipeleng Selaledi
For the merging parties: Vani Chetty Competition Law (Pty) Ltd
For the Commission: Themba Mahlangu
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