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[2013] ZACT 88
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Vukile Property Fund Ltd v Properties owned by Encha Properties (Pty) Ltd (016873) [2013] ZACT 88 (16 August 2013)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No.: 016873
|
In
the matter between
Vukile
Property Fund Limited Acquiring Firm
And
Properties
owned by Encha Properties (Pty) Ltd Target Firm
Panel:
Andreas
Wessels (Presiding Member)
Anton
Roskam (Tribunal Member)
Andiswa
Ndoni (Tribunal Member)
Heard
on: 31 July 2013
Order
issued on: 31 July 2013
Reasons
issued on : 16 August 2013
Decision
Approval
[1]
On 31 July 2013, the Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by Vukile Property
Fund
Limited (“Vukile”) of five properties owned by Encha
Properties (Pty) Ltd (“Encha”).
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
[3]The
primary acquiring firm is Vukile, a firm incorporated in terms of
the laws of the Republic of South Africa. Vukile is a
listed
property fund with controlling interests in various properties
located throughout South Africa. Of relevance to the competition
assessment of this transaction is Vukile’s ownership of office
and retail properties in the Pretoria Central Business District
(“Pretoria CBD”) and in Bloemfontein.
[4]
The primary target firm is five properties currently owned by Encha,
namely the following buildings: (i) De Bruyn Park; (ii)
Pretoria
Momentum; (iii) Navarre Wachthuis; (iv) Koedoe Arcade; and (iv)
Fedsure (hereinafter collectively referred to as “the
Target
Properties”). The Target Properties consist of rentable office
space with limited retail space. Four of the Target
Properties are
located in the Pretoria CBD with the Fedsure building located in the
Bloemfontein CBD.
Proposed
transaction and rationale
[5]
In terms of the proposed transaction Vukile will acquire the Target
Properties from subsidiaries of Encha.
[6]
Vukile stated that it considers the proposed transaction to be in
line with its stated long-term strategy of building and
maintaining
a quality portfolio of properties in order to achieve returns for
its investors.
[7]
Encha submitted that the proposed transaction will allow it to
realise its investment in the Target Properties.
Relevant
market and impact on competition
[8]
There is a horizontal overlap in the activities of the merging
parties since they both provide lettable office and retail
space in
Pretoria and Bloemfontein. More specifically, this overlap occurs in
relation to rentable Grade B office space and Grade
C office space
in the Pretoria CBD/Arcadia/Sunnyside and Bloemfontein areas.
Office
space in Pretoria CBC and immediate surrounds
[9]
In relation to rentable
Grade
B
office space in the Pretoria CBD, Arcadia and Sunnyside (“the
Pretoria CBD/Arcadia/Sunnyside node”), the Commission
found
that the merged entity will have a post-merger market share of
approximately 22%. The Commission further found that Vukile
will
continue to face competition in this area from market participants
such as Delta Property Fund, Redefine Properties, Fountainhead
Properties and Premium Properties.
[10]
In relation to. rentable
Grade
C
office space in the Pretoria CBD/Arcadia/Sunnyside node, the
Commission found that the merged entity will have a post-merger
market share of below 15%. The Commission further found that Vukile
will continue to face competition in this area from competitors
such
as Delta Property Fund, Arrowhead Properties, Momentum Property
Investment, Rebosis Properties and Premium Properties.
[11]
In a potential product market including both rentable
Grade
B
and
Grade
C
office
space in the Pretoria CBD/Arcadia/Sunnyside node, the merged entity
will have a post-merger market share of less than 20%.
1
As already noted above, Vukile will continue to face competition
from a number of larger as well as smaller competitors in such
a
potential broader relevant product market.
Office
space in Bloemfontein CBD
[12]
With regards to the Bloemfontein CBD, the Commission found that the
property owned by Vukile is used for
Grade
C
office space, whereas the target property (i.e. the Fedsure
building) is used for
Grade
B
offices. There is thus no overlap between the activities of the
merging parties based on a narrow approach to product market
delineation.
[13]
In a potential product market including both rentable
Grade
B
and
Grade
C
office
space in the Bloemfontein CBD, the merging parties submitted that
the merged entity will have a post-merger market share
of below
15%.
2
Retail
centres in Pretoria CBD
[14]
Vukile owns the Sancardia building in Pretoria, which is classified
as community retail space. The Commission also found
that Vukile
owns another relevant property in the Pretoria CBD (i.e. High Court
Chambers) which contains a coffee shop. On the
target side, the
Navarre Wachthuis, Koedoe Arcade and Pretoria Momentum buildings are
all classified as local convenience space
and the De Bruyn building
is classified as neighbourhood space.
[15]
The Commission considered a potential convenience centre product
market. It found that the merged entity will have a market
share of
less than 10% in a retail convenience centre product market within a
10 km radius around the relevant Target Properties.
[16]
However, regardless of the exact product market delineation, we find
that the proposed transaction will not substantially
prevent or
lessen competition in any potential market for lettable retail space
in the affected geographic area given the remaining
competitors in
the area.
Retail
centres in Bloemfontein CBD
[17]
In relation to retail centres in the Bloemfontein CBD, Vukile owns a
minor regional centre, namely Bloemfontein Plaza. The
Fedsure
building (to be acquired by Vukile) is classified as local
convenience retail space. The Commission thus found that there
is no
product overlap between the retail activities of the merging parties
in the Bloemfontein CBD. However, even if these different
types of
shopping centres constituted a single relevant product market, the
merged entity’s post-merger market position
in the
Bloemfontein CBD would not raise substantial competition concerns.
Conclusion
[18]
We conclude that that the proposed transaction is unlikely to
substantially lessen or prevent competition in any relevant
market.
Public
interest
[19]
The merging parties confirmed that the proposed transaction will
have no adverse effect on employment and that it will not
result in
any retrenchments.3 Furthermore, the proposed merger raises no other
public interest concerns.
CONCLUSION
[20]
We approve the merger unconditionally.
ANDREAS
WESSELS
16
August 2013
DATE
Anton
Roskam and Andiswa Ndoni concurring
Tribunal
Researcher: Caroline Sserufusa
For
the merging parties: Albert Aukema of Cliffe Dekker Hofmeyr Inc
For
the Commission: Portia Bele
1
Merger
record, page 47.
2
Merger
record, page 48.