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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016519
In the matter between:
Fortress Income 2 (Pty) Ltd Acquiring Firm
and
The immovable proprietary and property letting Targ et firm
Enterprises of:
Pick ‘n Pay Rustenburg,
Central Park Bloemfontein,
Nelspruit Plaza,
New Redruth Alberton,
Sterkspruit Plaza, and
Tzaneen Center
Panel: N Manoim (Presiding Member)
T Madima (Tribunal Member)
A Ndoni (Tribunal Member)
Heard on: 12 June 2013
Reasons and Order issued on: 13 June 2013
Reasons for Decision and Order
Unconditional Approval
1. On 12 June 2013 the Competition Tribunal approved t he acquisition by Fortress Income 2
(Pty) Ltd of six letting properties owned by Resili ent Properties Proprietary (“Resilient”) and
Diversified Properties 2 (Pty) Ltd (“Diversified”). The letting retail properties are:
• Pic
k ‘n Pay Rustenburg,
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• Ce
ntral Park Bloemfontein,
• Ne
lspruit Plaza,
• Ne
w Redruth Alberton,
• St
erkspruit Plaza, and
• Tzaneen Centre
2. The Reasons for approving the transaction are set out below.
Parties to the Transaction
3. The primary acquiring firm is Fortress Income 2 (Pt y) Ltd (“Fortress”), a wholly owned
subsidiary of Fortress Income Fund Limited, a publi c company listed on the Johannesburg
Stock Exchange Ltd.
4. Fortress is acquiring 6 letting properties which fa ll within the retail property categories.
These properties are owned by two wholly-owned subs idiaries of Resilient Property Income
Fund namely Resilient and Diversified. Resilient Pr operty Income Fund is a public company
listed on the Johannesburg Stock Exchange.
5. Resilient is selling the following letting properties:
• Pic
k ‘n Pay Rustenburg in Rustenburg, North West
• Ce
ntral Park Bloemfontein in Bloemfontein, Free State
• Ne
lspruit Plaza in Nelspruit, Mpumalanga
• Tzaneen Lifestyle Centre in Tzaneen, Limpopo
6. Diversified is selling two properties:
• New Redruth Village in Alberton, Gauteng
• Sterkspruit Plaza in Sterkspruit, Eastern Cape
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Proposed transaction and rationale
7. In terms of the merger agreement Resilient and Dive rsified intend to sell the properties to
Fortress as a single indivisible transaction.
8. Fortress indicated that it wants to expand its busi ness into retail properties situated close to
transport nodes in rural and central business distr icts and these properties fit that strategy.
Resilient Property Income Fund says the target prop erties no longer fit its strategy as it
wants to invest in regional centres that have natio nal retailers as tenants and which have a
minimum of three anchor tenants.
Competition Assessment
9. The activities of the merging parties overlap in the market for the provision of rentable retail
space in a convenience centre. Within this product market Fortress Income 2 (Pty) Ltd owns
retail properties that in some geographic markets c ompete with the properties that it is
acquiring. The Commission identified a narrow geographic market in all the product markets,
indicating that the customer draw distance for a co mmunity sized shopping centre is up to
10 km. Based on this narrow geographic market the C ommission found that there is an
overlap between the merging parties’ retail properties situated in Nelspruit and Alberton.
10. In Nelspruit the Riverside Mall, which is owned by the acquiring firm, is within a 5km radius
from Nelspruit Plaza. However, the Commission found that Riverside Mall customers are
predominantly from Swaziland, Mozambique and Nelspruit areas and fall within the LSM 6-9
income bracket. Nelspruit plaza’s customers reside in the Nelspruit area and the surrounding
rural areas and fall within the LSM 3-6 bracket. Th e two retail centres do therefore not
consider each other as competitors. To the extent t hat they do constrain each other there
are several alternative retail centres in the Nelspruit node to which customers can turn. Post
the transaction the merged entity will have a low m arket share of 7.6% in the relevant
product market.
product market.
11. In the Alberton node, Park Central Shopping Centre, which belongs to the acquiring firm, is
situated within a 10 km radius from New Redruth Village. However, as in the Nelspruit node,
the two shopping centres do not regard each other a s competitors. Central Park focuses on
customers in the lower LSM bracket, LSM 3-6, that liveand work in central Johannesburg and
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surrounding areas, while Redruth Village draws customers in the LSM 7-9 bracket that live in
Alberton. To the extent that the two centres do not constrain each other the Commission
found that there are several other retail centres i n the Alberton node. Post merger the
merged entity will have a low market share of 2.6% in the relevant product market.
12. In view of the above we conclude that the proposed transaction is unlikely to substantially
prevent or lessen competition in any of the relevant product markets.
Public Interest
13. The Commission was concerned that an exclusivity cl ause in the Nelspruit Plaza lease
agreement with The Spar Group would prevent SMMEs, such as independent retailers,
which compete with Spar and thus would be the subje ct of the exclusion, from operating in
Nelspruit Plaza. It therefore proposed that the Tribunal approve the transaction on condition
that Fortress renegotiate with Spar to removed the exclusivity clause from the current lease
agreement and any future lease agreements.
14. The merging parties had during the Commission’s inv estigation phase approached Spar who
indicated that it would not be willing to waive its rights. Furthermore during the hearing the
merging parties indicated to the Tribunal that Nels pruit Plaza did not have available retail
space to offer to new tenants even if the exclusion ary clause was waived nor was it possible
to expand the centre beyond its present size. It also indicated that it intended to remove the
exclusivity clause when it re-negotiates the lease agreement in 2016.
15. Given that the condition if imposed, would on the facts of this case been ineffectual, it is not
necessary for us to consider the prior question, na mely whether the public interest concern
over the exclusivity clause was merger specific. In light of the above we decided to approve
the transaction without such a condition.
16. There are no other public interest issues arising from this transaction.
16. There are no other public interest issues arising from this transaction.
Conclusion and Order
17. Having regard to the above, we find that the transaction is unlikely to substantially lessen or
prevent competition in any of the relevant markets. The merger is accordingly approved
without conditions.
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13 June 2013
N Manoim Date
Concurring: T Madima and A Ndoni
Tribunal Researcher: Rietsie Badenhorst
For the Commission: Angelo Mason
For the merging parties: DLA Cliffe Dekker Hofmeyer