COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:90/LM/OCT11
In the matter between:
Government Employees Pension Fund Acquiring Firm
And
Pareto Limited
Business Venture Investment No.1360 (Pty) Ltd Target Firms
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 14 December 2011
Order issued on : 14 December 2011
Reasons issued on : 12 January 2012
Reasons for Decision
Approval
1] On 14 December 2011 the Competition Tribunal (“Tribunal”) approved the
large merger between Government Employees Pension Fund (“acquiring
firm”) and Pareto Limited and Business Venture Investment No.1360 (Pty)
Ltd (“target firms”). The Tribunal’s reasons for approving the transaction
are set out below.
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The Parties to the transaction
2] The primary acquiring firm is firm is The Government Employees Pension
Fund1 (“GEPF”), a juristic entity established in terms of its own
empowering legislation2 represented herein by the Public Investment
Corporation3 (“PIC”). PIC is owned by the South African Government and
acts as an investment portfolio manager for GEPF. The fiduciary duties of
GEPF are the responsibility of its Board of Trustees, which acts in
conjunction with an equal number of employer and member
representatives.
3] GEPF is Africa’s largest pension fund with more than 1.2 million active
members, around 318 000 pensioners and beneficiaries, and assets worth
R700 billion. GEPF is a defined benefit pension fund that was established
in May of 1996 when various public sector funds were consolidated.
GEPF’s core business is to manage and administer pensions and benefits
for government employees in South Africa.4
4] GEPF is invests in equities, property, fixed income and in black economic
empowerment and infrastructure development projects that help to create
jobs, alleviate poverty and transform the economy. Of relevance to the
present transaction however, is GEPF’s involvement in the provision of
rentable shopping space and the provision of asset or property
management services. The GEPF property portfolio includes office
property, retail property, industrial property and residential property all over
South Africa.
5] The primary target firms in this transaction are Pareto Limited 5 (“Pareto”)
and Business Venture Investment No.1360 (“BVI”). Pareto is an unlisted
property variable loan stock company which invests in immovable property
1 http://www.gepf.gov.za/Pages/Home.aspx
2 Government Employees Pension Law of 1996, as amended.
3 http://www.pic.gov.za/Inveloper.asp?iP=7&iVdate=09/12/2011&iS={747BB555-D29D-435E-
A5F4-2792F66AA7ED}
4 http://www.gepf.gov.za/Pages/Home.aspx
5 http://www.pareto.co.za/
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with a focus on acquiring and developing major retail centres in South
Africa. Pareto owns ‘inter alia’ numerous stakes in major shopping centres
in Johannesburg, Cape Town, Bloemfontein and Durban.
6] BVI, which was formed in 2009/10, is a vehicle utilised to hold additional
property investment outside the Pareto structure so as not to contravene
Regulation 28 of the Pension Funds Act 6 which restricts a pension fund’s
investment in any one property company to no more than 5% of the total
assets of the fund. BVI is therefore also active in the provision of retail
property, community shopping centres, small regional shopping centres
and super regional shopping centres.
Description and rationale for the transaction
7] In terms of the Sale and Purchase Agreement between the merging
parties, GEPF, which already 40% of the issued share capital in the target
firms, intends to acquire the entire issued share capital of Pareto and BVI.
On completion of this transaction, GEPF will therefore acquire control 7 of
the two target firms.
8] Eskom Pension and Provident Fund (“EPPF”) currently holds the
remaining 60% issued share capital in the target firms and seeks to reduce
its interest due to it being more than 5% of the total assets of the fund and
is therefore in contravention of Regulation 28 of the Pension Fund Act.
Competition Analysis
9] In its investigation, the Commission found that the activities of the merging
parties overlap horizontally in that the merging parties are active in the
provision of rentable retail space, specifically small regional centre and
community shopping centres.
6 Act 24 of 1956
7 As defined in section 12(2)(a) of the Competition Act 89 of 1998.
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10]With regards to rentable retail space for community shopping centres in
Johannesburg, Southgate Value Market, owned by Pareto and The Wedge
at Morningside, owned by GEPF, are approximately 22 kilometres apart
and were therefore not regarded as being part of the same market.
11]In respect of Tyger Valley Centre and V&A Waterfront, which are both
regional shopping centres in Cape Town, the Commission found that there
is no overlap in terms of target markets due to both competitors and
customers’ comments highlighting that the two centres were in different
markets.
12]The Commission defined the market herein as the market for the provision
of community shopping centres in Cape Town and surrounding areas
located within 11 kilometres of the merging parties’ retail property; and the
market for the provision of small regional shopping centres in Cape Town
and surrounding areas located within 35 kilometres of the merging parties’
retail property.
13]With respect to the provision of community shopping centres in the Cape
Town area the Commission found that the merged entity will have
approximately 10% market share.
14]With regards to the provision of small regional shopping centres in the
Cape Town Area, the Commission found that the merged entity will have
approximately 14% market share.
15]The Commission also further found that Cavendish Square, co-owned by
OMLACSA and BVI caters for customers in higher LSM 8 categories while
Vangate Mall, owned by GEPF caters for customers in lower LSM
categories.
16]Further, based on third party views and comments, barriers to entry into
8 LSM is an acronym for ‘Living Standards Measure’. This measure profiles the market into
homogenous groups based on standards of living, rather than on income. The standard of
living is measured by adding the weighting ascribed to certain household products,
commodities or services which would typically be available to persons in those groups. See
commodities or services which would typically be available to persons in those groups. See
Tribunal Case No: 04/LM/Jan09.
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this market are not insurmountable and tenants of the merging parties
have countervailing power in that they can negotiate better rental and they
have alternative shopping centres where they can set up their stores.
17]The proposed transaction does not present any vertical overlaps.
18]In light of the above, the Commission concluded that the proposed
transaction is unlikely to substantially prevent or lessen competition in the
aforementioned markets. We agree with the Commission’s conclusion.
Conclusion
19]The proposed transaction is unlikely to raise any public interest concerns
as it is a transfer of shares from one entity to another.
20]We conclude that the proposed transaction is unlikely to substantially
prevent or lessen competition and accordingly, the above merger is
approved without conditions.
____________________ 12 January 2012
N Manoim Date
Y Carrim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Lerisha Naidu and Natalie von Ey of Cliffe Dekker
Hofmeyr
For the Commission: Mogau Aphane and Nompucuko Nontombana
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