COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 20/LM/Mar11
In the matter between:
Investec Property Ltd Acquiring Firm
And
The Edgardale Properties Target Firms
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member) and
Andiswa Ndoni (Tribunal Member)
Heard on : 26 May 2011
Order issued on : 26 May 2011
Reasons issued on : 21 June 2011
Reasons for Decision
APPROVAL
1] On 26 May 2011 the Competition Tribunal (“Tribunal”) unconditionally
approved the proposed transaction involving Investec Property Ltd and The
Edgardale Properties. The reasons for the approval of this transaction follow
below.
1
PARTIES TO THE TRANSACTION
2] The primary acquiring firm is Investec Property Ltd (“IPL”), a public company
registered in accordance with the company laws of South Africa. IPL is a
wholly owned subsidiary of Investec Ltd (“Investec”), a public company listed
on the JSE. Investec and IPL have various subsidiaries.1
3] IPL specialises in property and land acquisitions which involve sourcing
buildings and land opportunities as well as in the development and
refurbishment of buildings within the commercial, retail, industrial and
residential sectors.
4] The primary target firms are certain properties currently owned by Edcon
(Pty) Ltd (“Edcon”), collectively referred to hereinafter as “The Edgardale
Properties”.2 These properties comprise of two “Grade B” office blocks and a
warehouse situated in Crown Mines, Gauteng. The relevant properties are
occupied by Edcon which utilises the properties as its head office and
warehousing distribution centre. According to the merging parties’
submissions certain portions of these properties are sub-leased to other firms.
DESCRIPTION OF THE TRANSACTION
5] In terms of the proposed transaction, IPL intends to acquire The Edgardale
Properties from Edcon as going concerns which will result in IPL post merger
owning and having sole control of The Edgardale Properties. As part of the
proposed transaction Edcon will, on the date of the transfer of The Edgardale
Properties to IPL, sign a lease agreement with IPL, in terms of which Edcon
will lease The Edgardale Properties from IPL.
RATIONALE FOR THE TRANSACTION
6] The merging parties submitted that prior to this proposed transaction Sanlam
Ltd (“Sanlam”) owned The Edgardale Properties and leased the properties to
Edcon. Edcon had a pre-emptive right to purchase the properties from
Sanlam and wished to give value to that pre-emptive right by purchasing the
properties from Sanlam and on-selling them to IPL.3
properties from Sanlam and on-selling them to IPL.3
1 Refer to “Annexure A” to Form CC 4(1) for an organogram of the Investec Group.
2 See inter alia page 49 of the record for a list of these properties.
3 According to the merging parties, Edcon’s acquisition of The Edgardale Properties from Sanlam was not a
notifiable merger since it did not meet the relevant thresholds for notification.
2
7] From IPL’s perspective, The Edgardale Properties fit its investment portfolio
and have a good long standing tenant in Edcon, which creates an enhanced
value.
COMPETITION ANALYSIS
8] As indicated above, The Edgardale Properties comprise of (i) Grade B office
blocks; and (ii) a warehouse, i.e. a light industrial property. The South African
Property Owners Association (“SAPOA”) has no defined node that specifically
deals with the Crown Mines area, but has assigned a geographical node titled
the “South West Industrial – Main Reef corridor included”. Investec does not
own or control any office property in the South West Industrial node or any
Grade B office blocks in the Johannesburg CBD node. It does however own a
distribution warehouse situated in the Theta Township Extension 1 which is
approximately 4 to 5 km from Crown Mines. There is therefore an overlap in
the activities of the merging parties in respect of light industrial property in the
South West Industrial node, alternatively in the larger Johannesburg CBD
node.
9] The merged entity’s post merger market share in a potential market for light
industrial property in the South West Industrial node will be approximately
27%. However, according to Commission’s market investigation this market
share is significantly overstated since it does not take into account all the light
industrial properties in this node. This was confirmed by SAPOA 4; the 2010
SAPOA survey on which the above-mentioned market share is based
includes only 13 buildings. Market participants however advised the
Commission that there are currently approximately 50 industrial buildings in
the Crown Mines area.
10] Furthermore, Edcon advised the Commission that the sub-leases in regard to
certain portions of the properties that are sub-leased to other firms, in terms
of duration will be renewed on the same terms and indicated that it anticipates
that such sub-leases will remain in place for as long as Edcon leases The
that such sub-leases will remain in place for as long as Edcon leases The
Edgardale Properties (subject to the rights of both parties to terminate in
accordance with the terms of the sub-lease agreements).5
4 See page 8 of the Commission’s recommendation.
5 See page 8 of the Commission’s recommendation, as well as page 647 of the record.
3
11] Based on the above, we conclude that the proposed transaction is unlikely to
result in a substantial lessening or prevention of competition in any relevant
market.
PUBLIC INTEREST
12] The merging parties submitted that no retrenchments will result from the
proposed transaction.6 The proposed deal raises no other public interest
issues.
CONCLUSION
13] We conclude that the proposed transaction is unlikely to lead to a substantial
prevention or lessening of competition in any relevant market. Furthermore,
no public interest concerns arise from this deal. Accordingly the proposed
transaction is approved unconditionally.
21 June 2011
____________________
Andreas Wessels DATE
Medi Mokuena and Andiswa Ndoni concurring
Tribunal Researcher: Ipeleng Selaledi
For the merging parties: Werksmans Inc.
For the Commission: Lerato Monareng
6 See inter alia page 10 of the record.
4