COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:61/LM/Jun12
(015180)
In the matter between:
Redefine Properties Limited Acquiring Firm
And
Fountainhead Property Trust Management Limited, Target Firm
and Evening Star Trading 768 (Proprietary) Limited
Panel : Yasmin Carrim (Presiding Member),
Andreas Wessels (Tribunal Member),
Andiswa Ndoni (Tribunal Member)
Heard on : 25 July 2012
Order issued on : 25 July 2012
Reasons issued on : 13 August 2012
Reasons for Decision
Approval
1] On 25 July 2012 the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger between Redefine Properties Limited and
Fountainhead Property Trust Management Limited and Evening Star
Trading 768 (Proprietary) Limited. The reasons for approving the proposed
transaction follow below.
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Parties to transaction
2] The primary acquiring firm is Redefine Properties Limited (‘Redefine”), a
public company incorporated in terms of the laws of the Republic of South
Africa. Redefine is listed on the Johannesburg Stock Exchange and is not
controlled by another firm.
3] The primary target firms are Fountainhead Property Trust Management
Limited (“Fountainhead Manco”) and Evening Star Trading 768
(Proprietary) Limited (“Evening Star”). Standard Bank Properties (Pty) Ltd
(“Standard Bank”) and Liberty Holdings Limited (“Liberty”) each have a
50% shareholding in both of the target firms.
Activities of merging parties
4] Redefine is a property loan stock company with a diversified portfolio of
office, retail and industrial properties which are located throughout South
Africa. It also conducts its own internal asset management services.
5] Fountainhead Manco manages Fountainhead Property Trust
(“Fountainhead”), a property unit trust. Fountainhead is a closed-end fund
listed on the JSE. Its portfolio consists of retail, industrial and office
properties throughout South Africa. Evening Star is contracted to perform
asset management functions for Fountainhead’s properties and to provide
investment advice to Fountainhead.
Proposed transaction and rationale for transaction
6] The proposed transaction entails Redefine acquiring all the shares in, and
claims against, Fountainhead Manco and Evening Star from Standard
Bank Properties and Liberty. Post-transaction, Redefine will be able to
exercise control over Fountainhead Property Trust’s property portfolio
through its capacity as Fountainhead Manco’s owner.
7] According to Redefine, the proposed transaction is in line with its
investment strategy to improve the quality of its property portfolio, to
enhance earnings and to improve long term capital appreciation by
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acquiring high quality, well located properties.
8] Standard Bank and Liberty do not wish to continue conducting asset
management services in relation to Fountainhead.
Relevant markets and impact on competition
Horizontal Analysis
9] In determining the relevant product markets, the Commission took into
account previous Tribunal decisions, 1 and property classifications by
industry bodies SAPOA and Rodes where properties within each main
property category are divided into different grades. There is very limited
substitutability between the different grades.
10]The Commission found that there is a horizontal overlap in the activities of
the merging parties with regard to the provision of rentable grade A and
grade B office space, and rentable light industrial space.
11]The Commission defined the relevant markets as follows:
• The market for the provision of rentable grade A office space in the
Bryanston/Epson Down node, the Sandton and Environs node, the
Durban and Environs node, and the Rosebank and Surrounds
node.
• The market for the provision of rentable grade B office space in the
Rosebank and Surrounds node, the Randburg node, the Durban
and Environs node, the Pretoria CBD node and the Centurion node.
• The market for the provision of rentable light industrial space in the
Midrand node.
12]The Commission found that, although there is a horizontal overlap in the
activities of the merging parties in the relevant markets, the combined
post-merger market shares are too low to raise any competition concerns.
1 Hyprop Investment Limited and Atterbury Investment Limited and Attfund Retail Limited and
Mantrablox (Pty) Ltd, case number 29/LM/Jun03, and other Tribunal cases including 34/LM/Jul03
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The merged entity’s combined, post-merger market shares in all the
relevant nodes in the markets for the provision of rentable grade A office
space, grade B office space and light industrial space is below 10%. The
only exception is the Centurion node in the market for grade B office space
where the combined post-merger market share is 16.2%. However, the
merged entity will continue to face competition from Growthpoint
Properties Limited, Abland (Pty) Ltd, Hyprop Properties Limited, Atterbury
Propery and others. The merging parties’ tenants also have a degree of
countervailing power due to the availability of alternative sources of
rentable grade B office space in the area. We thus agree with the
Commission’s conclusion that the proposed transaction will not
substantially prevent or less competition in the relevant market.
Public Interest
13]The merging parties submitted that the proposed transaction will have no
adverse effects on employment since they do not foresee any
retrenchments as a result of the merger.2 Although six white-collar workers
currently employed by Standard Bank for managing Fountainhead Manco
will be affected by the proposed transaction, the terms of sale provide
these employees with the option to transfer their employment to Redefine.
Employees selecting this option will be protected from retrenchment for 12
months.3 The merging parties submitted that if the employees elect not to
transfer to Redefine, they will be redeployed within the Standard Bank
Group.4 The Commission thus concluded that the proposed transaction
does not raise any employment concerns.
14]No other public interest issues arise due to this transaction.
Conclusion
15]Having regard to the facts above, we find that the proposed merger is
2See page 146 of the Record
3 ibid
4 ibid
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unlikely to substantially lessen or prevent competition in any relevant
markets. Furthermore, the proposed transaction raises no public interest
concerns. Accordingly, we approve the merger unconditionally.
____________________ 13 August 2012
Yasmin Carrim DATE
A Wessels and A Ndoni concurring
Tribunal Researcher: Elizabeth Preston-Whyte
For the merging parties: Vani Chetty of Vani Chetty Competition Law
For the Commission: Zanele Hadebe and Lindiwe Khumalo
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