COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:94/LM/Nov11
In the matter between:
REDEFINE PROPERTIES LIMITED Acquiring Firm
And
SIX LETTING ENTERPRISES HELD BY
COOL IDEAS 208 (PTY) LTD,
IMPROVON PROPERTY FUND 1 (PTY) LTD,
IMPROVON GROWTH FUND (PTY) LTD AND
WAVELENGTH 124 (PTY) LTD Target Firm
Panel : Andreas Wessels (Presiding Member)
Andiswa Ndoni (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 13 December 2011
Order issued on : 13 December 2011
Reasons issued on : 21 December 2011
Reasons for Decision
Approval
1] On 13 December 2011, the Competition Tribunal (“Tribunal”) approved
the large merger between Redefine Properties (Pty) Ltd (“Redefine”)
and six letting enterprises held by Cool Ideas 208 (Pty) Ltd, Improvon
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Property Fund 1 (Pty) Ltd (“Improvon Fund 1”), Improvon Growth Fund
(Pty) Ltd (“Improvon Growth”) and Wavelength 124 (Pty) Ltd
(“Wavelength”). The reasons for approving the proposed transaction
follow below.
The Transaction
2] The primary acquiring firm is Redefine, a private company incorporated
in terms of the laws of the Republic of South Africa. Redefine is not
controlled by any firms; however, the following shareholders hold in
excess of 5%:
Shareholder Interest
Stanlib 7.08%
Old Mutual 6.81%
Investec 5.56%
Government Employees Pension Fund 5.12%
3] Redefine has a 47.5% investment in Hyprop Investments Limited
(“Hyprop”), which has 100% of the issued share capital in Attfund
Retail Ltd (“Attfund”) as well as a 49.8% unit holding in a BEE property
fund, being Vunani Property Investment Fund (“Vunani”). Vunani is
jointly controlled by Vunani Properties Limited and Hyprop.
4] The primary target firm are Cool Ideas, Improvon Fund 1, Improvon
Growth and Wavelength. These four firms were created by the
Improvon Group for property and rental income purposes. The
Improvon Group trades mainly in the industrial property market and
specialises in industrial and commercial facilities.
5] The transaction regards the sale of these target properties in terms of a
few Sale Agreements. These are indivisibly linked transactions, due to
the fact that they are are cross-conditional on each other and
contemporaneous. However, separate agreements are concluded to
ensure that the transactions each reflect the indivisible nature of each
one, but for all intents and purposes it is concluded as one transaction.
Once the transaction is complete, Redefine will control Cool Ideas.
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The Rationale
6] The rationale for the proposed merger is that Redefine wishes to
expand its existing property portfolio by acquiring additional light
industrial space, which ties in with their current strategy. The Improvon
Group seeks to realize the value of the investment it has made and to
exit the commercial property letting market.
The parties and their activities
7] Redefine is a property loan stock company with properties in
commercial retail property, office space and industrial space around
South Africa.
8] The target properties are classified as light industrial properties in
various nodes, being Longmeadow, Alrode, Jet Park and Spartan.
The relevant market and the impact on competition
9] The transaction does result in a horizontal overlap in the market for
light industrial property, as Redefine owns such property and teh target
firms are classified as such as well. Therefore there is a geographic
overlap in the market for light industrial properties in the following three
nodes: Longmeadow, Jet Park and Spartan.
10]However, the transaction is unlikely to substantially prevent or lessen
competition, as the merged entity’s increased post-merger market
shares in the respective nodes remain low, as depicted in the table
below.
Node Pre-merger market share Post-merger market share
Spartan 6.13% 8.30%
Jet Park 5.75% 6.92%
Longmeadow 0.62% 3.85%
11]Further, there are other competitors in the property sector in those
respective nodes, such as Growthpoint, Sanlam and Old Mutual, with
estimated market shares in the property sector, as depicted below:
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Competitor Market share
Growthpoint 23.78%
Old Mutual 17%
Sanlam 9%
CONCLUSION
12]The proposed transaction will not result in any employment losses and
it does not raise any other public interest issues.
13]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 six light
industrial property enterprises is unlikely to result in substantial
prevention or lessening of competition in the relevant market.
Accordingly, we approve the above merger unconditionally.
____________________ 21 December 2011
ANDREAS WESSELS DATE
Andiswa Ndoni and Medi Mokuena concurring.
Tribunal Researcher: Nicola Ilgner
For the merging parties: Vani Chetty Competition Law
For the Commission: Dineo Mashego
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