COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 47/LM/Apr12
(014993)
In the matter between:
Redefine Properties Limited Acquiring firm
And
Hyprop Investments Limited in respect
of a 50%undivided share of the business
enterprise known as South Coast Mall Target Firm
Panel : Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 04 July 2012
Order issued on : 04 July 2012
Reasons issued on : 24 July 2012
Reasons for Decision
Conditional approval
[1] On 04 June 2012 the Competition Tribunal (“Tribunal”) approved the
merger between Redefine Properties Limited and Hyprop Investments
in respect of a 50% undivided share in the business enterprise known
as South Coast Mall. The reasons for conditionally approving the
proposed transaction follow below.
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Parties to the transaction
[2] The primary acquiring firm is Redefine Properties Limited (“Redefine”),
a listed property investment holding company. Redefine is involved in
the retail, office, industrial and retail property sectors in South Africa.
[3] The primary target firm is the business enterprise known as South
Coast Mall. Hyprop Investments Limited (“Hyprop”) holds a 50%
undivided share in this business enterprise. South Coast Mall is
categorised as a minor regional centre and is situated in Shelly
Beach, Kwa-Zulu Natal Province.
[4] South Coast Mall is jointly owned and jointly managed, thus all major
decisions, including rentals must be decided unanimously.
Proposed transaction
[5] Redefine and Hyprop are currently joint owners of South Coast Mall.
In terms of the proposed transaction, Redefine will acquire from
Hyprop its 50% interest in South Coast Mall. Redefine currently holds
the other 50% interest in South Coast Mall.
[6] Upon implementation of the transaction, Redefine will have a 100%
interest in and as such sole control over South Coast Mall.
Rationale for the transaction
[7] This transaction represents a change from joint to sole control over
South Coast Mall. Redefine wishes to expand their property portfolio
into the small retail property market. Therefore, Redefine regards
wholly owning, as opposed to jointly controlling, South Coast Mall as
the most ideal method to align their property portfolio with their
strategic plan.
[8] Hyprop’s objective is to rather invest in large regional shopping
centres.
2
Relevant markets and impact on competition
[9] There is an overlap present between the activities of the merging
parties, as they are both involved in the provision of rentable retail
space in South Africa. There is no geographical overlap between the
merging parties, as the nearest Redefine centre is situated 120
kilometres from the target property.1
[10] There are more than ten various shopping centres within a 10
kilometre radius of South Coast Mall which will compete with this
centre, none of which are owned by Redefine.
[11] The Commission, however, raised a concern pertaining to an
exclusivity clause in the lease agreement between the anchor tenant,
namely Shoprite Checkers, and the landlord. This ten year lease
agreement has three years remaining until renewal is due to take
place. The Commission was concerned that this exclusivity clause
could have the effect of preventing small businesses from gaining
access to rentable retail space in South Coast Mall.
[12] In order to address this concern, the merging parties undertook that
certain conditions be attached to the approval of this transaction.
[13] Given that this undertaking has been offered by the merging parties
we are not required to decide the matter. The Tribunal has therefore
decided to approve the transaction, subject to the following conditions
undertaken by the merging parties:
1. Redefine shall negotiate with Checkers in the utmost good faith to
have the exclusivity clause in the lease agreement removed
within thirty days of the Tribunal order.
2. Redefine shall within sixty days after entering into a new lease
agreement with Checkers, provide the Commission with a report
setting out in detail the extent to which they have complied with
the condition of removing the exclusivity clause.
1 See page 4 of the transcript.
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Public interest
[14] The merging parties confirmed that there will be no adverse effect on
employment as a result of the proposed transaction 2. No other public
interest issues arise as a result of this transaction.
CONCLUSION
[15] We approve the proposed merger subject to the conditions attached
hereto as “Annexure A”.
__________________ 24 July 2012
NORMAN MANOIM DATE
Yasmin Carrim and Andiswa Ndoni concurring.
Tribunal Researcher: Nicola Ilgner
For the merging parties: Vani Chetty Competition Law
For the Commission: Zanele Hadebe
2 See page 92 of the record.
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