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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016170
In the merger between:
ACCELERATE PROPERTY FUND LIMITED PRIMARY ACQUIR ING FIRM
and
15 LETTING ENTERPRISES BEING SOLD
BY FOURWAYS PRECINCT (PTY) LTD PRIMARY TARGET FIRMS
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Mondo Mazwai (Tribunal Member)
Heard on : 13 March 2013
Order issued on : 19 March 2013
Reasons issued on : 17 April 2013
Decision
Conditional Approval
[1] On 19 March 2013, the Competition Tribunal (“Tr ibunal”), in terms of section
16(2)(b) of the Competition Act of 1998
1, conditionally approved the acquisition
by Accelerate Property Fund Limited of 15 letting e nterprises being sold by
Fourways Precinct (Pty) Ltd.
[2] The reasons for conditionally approving the proposed transaction follow.
1 Act No. 89 of 1998, as amended.
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Parties to transaction
[3] The primary acquiring firm is Accelerate Proper ty Fund Limited (“Accelerate”),
a special purpose vehicle newly established for the purposes of the proposed
transaction. Accelerate is to hold a portfolio of p roperties throughout South
Africa and intends to list its shares on the Johann esburg Stock Exchange
Limited (the “JSE”). The sole shareholder of Accele rate (as at January 2013)
until the listing date is Mr. Michael Nicolas Georgiou.
[4] We note that the Competition Commission (“Commi ssion”) on 12 February
2013 conditionally 2 approved two intermediate merger notifications, 3 in terms
of which Accelerate will acquire a total of 72 prop erties, consisting of rentable
retail, office, industrial and mixed use properties located throughout South
Africa. These properties were taken into account as part of Accelerate’s
property portfolio in the competition analysis of this transaction.
[5] The primary target properties comprise 15 letti ng enterprises 4 being sold by
Fourways Precinct (Pty) Ltd (“Fourways Precinct”). These properties are all
located in the Fourways node and comprise nine shopping centres and six
office properties classified as rentable B-Grade office space.
Proposed transaction and rationale
[6] Accelerate intends acquiring a property portfol io from Fourways Precinct
comprising of 15 letting enterprises.
[7] Accelerate was created to facilitate the acquis ition of a number of properties
and to list on the JSE to inter alia raise capital to pursue growth and
investment opportunities in the future and to enhan ce the public profile and
general public awareness of Accelerate.
2 These conditions are similar in nature to those imposed on this transaction and are aimed at
addressing a public interest concern.
3 See pages 8 and 10 to 13 of the Commission’s report.
4 For a list of these properties, see pages 7 to 9 of the merger record.
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Competition assessment
[8] The Commission found no geographic overlap betw een the activities of the
merging parties in any relevant market except for the market for rentable retail
space in a convenience centre. One of the shopping centres being acquired
by Accelerate is the Buzz Shopping Centre located a t Witkoppen,
Johannesburg. Accelerate will also own inter alia the Leaping Frog and
Waterford Shopping Centre located in respectively S andton and Fourways.
However, the Commission found that there are numero us competing
shopping centres within a 5 to 10 km radius from th e Buzz Shopping Centre.
The Commission was therefore satisfied that no comp etition concerns will
arise as a result of this transaction. We concur with this conclusion.
Public interest
Employment
[9] The merging parties confirmed that the proposed transaction will have no
adverse effect on employment.
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Small business
[10] The Commission raised a public interest concer n pertaining to the exclusivity
clauses contained in the lease agreements of four t enants in certain shopping
centres to be acquired by Accelerate in terms of th is transaction (namely the
Fourways Mall Shopping Centre, Cedar Square and the Buzz Shopping
Centre). The Commission was concerned that these ex clusivity clauses could
have the effect of preventing small businesses, suc h as butcheries and
delicatessen stores, from gaining access to rentabl e retail space in the
respective shopping centres. In order to address th is concern, the
Commission, based on certain undertakings by the me rging parties,
recommended that certain conditions should be attac hed to the approval of
this merger. These recommended conditions were aime d at the removal of
the respective exclusivity clauses at the renewal d ates of each of the lease
agreements.
5 See pages 11, 20, 81 and 133 of the record.
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[11] We agree with the Commission’s conclusion that the above-mentioned
exclusivity clauses in certain lease agreements eac h raise a public interest
concern in terms of section 12A.(3)(c) of the Act a nd that conditions are
warranted to address such concern.
[12] However, the Tribunal was concerned that certain of these lease agreements
were only renewable on a distant future date, i.e. in 20[...] and 20[...]. Given
these concerns of the Tribunal, the merging parties consequently in respect of
the relevant lease agreements undertook to negotiat e with the relevant
tenants to have the exclusivity clauses in the leas e agreements removed
within a specified period of the Tribunal’s approva l date of the transaction, i.e.
well in advance of the renewal dates contained in the lease agreements.
[13] Based on these revised undertakings by Acceler ate, the Tribunal approved
the proposed transaction subject to the following conditions:
1. Accelerate shall negotiate with […] (Pty) Ltd in respect of the current
effective lease agreement, in the utmost good faith , to have the
exclusivity clauses in the lease agreement in respe ct of the Fourways
Mall Shopping Centre removed at the approaching ren ewal date (in
20[…]) as contained in the lease agreement.
2. Accelerate shall negotiate with […] (Pty) Ltd in respect of the current
effective lease agreement, in the utmost good faith , to have the
exclusivity clauses in the lease agreement in respe ct of the Cedar
Square, removed within [...] of the Tribunal order.
3. Accelerate shall negotiate with […] (Pty) Ltd in respect of the current
effective lease agreement, in the utmost good faith , to have the
exclusivity clauses in the lease agreement in respe ct of the Cedar
Square, removed within [...] of the Tribunal order.
4. Accelerate shall negotiate with […] (Pty) Ltd in respect of the current
effective lease agreement, in the utmost good faith , to have the
exclusivity clauses in the lease agreement in respe ct of the Buzz
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Shopping Centre removed at the approaching renewal date (in 20[…])
as contained in the lease agreement.
[14] In the context of the above-mentioned public i nterest concern, we have
imposed the aforementioned conditions aimed at addr essing likely effects on
the ability of small businesses to become competitive.
Other public interest issues
[15] Apart from the above-mentioned concern, the pr oposed merger raises no
other public interest concerns.
CONCLUSION
[16] We approve the proposed transaction subject to the conditions set out in the
attached “Annexure A ”.
______________________ 17 April 2013
ANDREAS WESSELS DATE
Medi Mokuena and Mondo Mazwai concurring
Tribunal Researcher: Nicola Ilgner
For the Commission: Dineo Mashego
For the merging parties: Glyn Marais Inc.