COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 85/LM/SEP11
In the matter between:
REDEFINE PROPERTIES LTD Acquiring Firm
And
ZENPROP PROPERTY HOLDINGS Target Firm
IN RESPECT OF A PORTFOLIO OF
PROPERTY LETTING ENTERPRISES
Panel : Norman Manoim (Presiding Member)
Merle Holden (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 29 November 2011
Order issued on : 29 November 2011
Reasons issued on : 01 December 2011
Reasons for Decision
Approval
1] On 29 November 2011, the Competition Tribunal (“Tribunal”) approved the
large merger between Redefine Properties Ltd and Zenprop Property
Holdings, in respect of a portfolio of property letting enterprises (“Zenprop”).
We explain below our reasons for this conclusion.
The Parties to the transaction
2] The primary acquiring firm is Redefine Properties Ltd (“Redefine”), a public
company incorporated in accordance with the laws of the Republic of South
Africa. Redefine is not controlled by any firm, however, it controls a number of
subsidiaries.
3] The primary target firm is Zenprop Property Holdings (“Zenprop”), which is a
privately-held South African based property investment, development and
management company, specifically in terms of this transaction in respect of a
portfolio of property letting enterprises. Gingko Trust and Fynbos Trust have
the largest shareholding in Zenprop, being a 33.820% and 32.590% interest
respectively. Zenprop directly or indirectly controls 64 companies and has a
property portfolio of approximately 90 A-Grade buildings.
4] In terms of the transaction, Redefine will acquire 14 property-letting
enterprises from Zenprop.
The Rationale
5] The merging parties submitted that the acquisition is in line with Redefine’s
strategy to improve the quality of its property portfolio by focussing on larger
higher-grade investment properties. The sale of the 14 properties will enable
Zenprop to fund its future growth, as well as to finance investments in new
developments. It will also enable Zenprop to realise a value to purchase more
properties and to unlock value in older properties to acquire new properties.
Zenprop requires cash to develop and build new properties.
The parties’ activities
6] Redefine is a property loan stock company with companies in commercial
retail property, office space and industrial space in South Africa.
7] Zenprop is a property development and investment company and its portfolio
is spread across the retail, commercial, industrial and hotel property sectors
within the major business centres in South Africa.
The relevant market and the impact on competition
8] There are both product and geographic overlap in the parties’ activities regarding
rentable A-Grade office space in the Cape Town CBD, Fourways and Sandton,
in rentable retail space in Fourways and lastly in the market for light industrial
space in Midrand.
9] However, the Commission found that the post-merger market shares are too low
to substantially prevent or lessen competition in each of the product markets, as
can be seen below:
Market shares: Rentable A-Grade office space
Node Pre-merger market share Post-merger market share
Cape Town CBD 13.78% 18.17%
Sandton 5.68% 6.92%
Fourways 2.07% 5.84%
Market shares: Retail space
Node Pre-merger market share Post-merger market share
Cape Town CBD 7.03% 9.25%
Market shares: Light industrial space
Node Pre-merger market share Post-merger market
share
Midrand 1.03% 1.66%
Conclusion
10]The parties submitted that the proposed transaction will not result in any
employment losses. The proposed transaction does not raise any other public
interest issues.
11]The Tribunal agrees with the recommendation of the Commission that, in light of
the low post-merger market shares and other large competitors active in those
markets, the acquisition of the portfolio of properties is unlikely to result in
substantial prevention or lessening of competition in the relevant market.
Accordingly, we approve the above merger unconditionally.
____________________ 01 December 2011
NORMAN MANOIM DATE
Merle Holden and Medi Mokuena
Tribunal Researcher: Nicola Ilgner
For the merging parties: Vani Chetty Competition Law
For the Commission: Bheki Masilela