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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 017533
In the matter between:
Old Mutual Life Assurance Company Acquiring Firm(s)/
(South Africa) Ltd and Business Venture Target Firm(s)
Investments No. 1360 (Pty) Ltd
And
Woolworths (Pty) Ltd Target Firm
Acquiring Firm
Panel : Mondo Mazwai (Presiding Member)
Medi Mokuena (Tribunal Member)
Fiona Tregenna (Tribunal Member)
Heard on : 02 October 2013
Order issued on : 02 October 2013
Reasons issued on : 30 October 2013
Reasons for Decision
Approval
1. On 02 October 2013 the Competition Tribunal ("the Tribunal”)
unconditionally approved an asset swop transaction between Old Mutual
Life Assurance Company (South Africa) Ltd (“OMLACSA”) and Business
Venture Investments No. 1360 (Pty) Ltd (“BVI”), on the one hand, and
Woolworths (Pty) Ltd (“Woolworths”) on the other, in terms of which
OMLACSA and BVI will acquire two retail properties from Woolworths (“
the retail property transaction”), which in turn, will acquire two industrial
properties from OMLACSA (“the industrial property transaction”).
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2. The reasons for the approval of the proposed transaction follow.
The Parties and their activities
3. The primary acquiring firms in the retail property transaction are
OMLACSA and BVI, firms incorporated in terms of the laws of the
Republic of South Africa. OMLACSA is controlled by Old Mutual Life
Holdings (South Africa) Ltd (“OMLH”), which is in turn controlled by Old
Mutual (South Africa) Ltd (“OMSA”). OMSA is controlled by Old Mutual
Netherlands B.V. (“Old Mutual Netherlands”) which is a wholly owned
subsidiary of OM Group (UK) Ltd (“OM Group UK”). OM Group UK is in
turn wholly owned by Old Mutual Plc.
4. BVI is 100% controlled by the Government Employees Pension Fund (“
GEPF”). GEPF directly and indirectly controls the following firms: ADR
International Airports South Africa (Pty) Ltd, Pareto Ltd, Lexshell 44
General Trading (Pty) Ltd, CBS Property Portfolio and Opiconsivia
Investments 230 (Pty) Ltd.
5. OMLACSA conducts business in the life assurance sector in Southern
Africa, including South Africa, and also has investments in fixed property
including retail, office and industrial property. BVI was formed in 2009 as a
vehicle to hold additional property investments outside of Pareto. It is an
unlisted property variable loan stock company which invests in immovable
property with a focus on acquiring and developing major retail centres in
South Africa. Of relevance to the competition assessment of this
transaction are OMLACSA and BVI’s joint ownership of two retail
properties, namely, Cavendish Square and Cavendish Connect (“
Cavendish”) as well as OMLACSA’s ownership of two industrial properties,
namely, the Trade Centre and Racehorse Industrial.
6. The primary target firm in the retail property transaction is Woolworths, a
firm incorporated in terms of the laws of the Republic of South Africa.
Woolworths is directly controlled by Woolworths Holdings Ltd (“
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Woolworths Holdings”). Woolworths Holdings is not controlled by any firm
and is listed on the Johannesburg Stock Exchange.
7. Woolworths conducts business in the food and retail sector in Southern
Africa, including South Africa and also has investments in fixed property
including retail, office and industrial property. Of relevance to the
competition assessment of this transaction is Woolworths’ ownership of
two industrial properties, namely, Montague Gardens and Montague
Gardens Extension as well as two retail properties, namely, The Place and
Dreyer Street.
8. Regarding the industrial property transaction, Woolworths is the primary
acquiring firm. OMLACSA (more specifically, the Trade Centre and
Racehorse Industrial properties) is the primary target firm.
Proposed transaction and rationale
9. As indicated above, the proposed transaction constitutes an asset swop
between the merging parties in terms of which OMLACSA and BVI intend
to jointly acquire two retail properties, namely, “The Place” and “Dreyer
Street”, from Woolworths. In turn, Woolworths intends to acquire two
industrial properties, namely, the “Trade Centre” and “Racehorse Industrial
”, from OMLACSA. Upon completion of the proposed transaction,
OMLACSA and BVI will jointly own the two target retail properties and
Woolworths will solely own the two target industrial properties.
10.OMLACSA and BVI indicated that proposed transaction gives them an
opportunity to acquire more retail space, thus adding to the much needed
critical mass at Cavendish.
11.Woolworths indicated that it wishes to increase its distribution chain
capabilities by building clothing and general merchandise facilities on the
target industrial properties.
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Competition analysis
12.As OMLACSA and BVI already own retail properties and are swopping
retail assets and Woolworths already owns industrial properties and is
swopping industrial assets, the Commission assessed the impact of the
proposed transaction in the markets for rentable retail and rentable
industrial properties.
The market for rentable retail property
13.The two target retail properties that are to be acquired from Woolworths
are both situated in Claremont, Cape Town, and are adjacent to the
shopping centre that OMLACSA and BVI currently jointly own, i.e.
Cavendish. The Commission, however, found that there is no direct
horizontal overlap since the two target retail properties are classified as
convenience centres1) whilst the shopping centre owned byOMLACSA and
BVI is classified as a comparative centre.2)
14.However, since the target properties are adjacent to OMLACSA and BVI’s
comparative centre (Cavendish) and will, post-merger, become extensions
of Cavendish3), the Commission assessed the impact of the transaction on
the rentable retail comparative centre market within a 15km radius of
Cavendish in Cape Town. The Commission found that there are a
significant number of alternative retail centres which fall within the category
1) Convenience centres typically include free standing, convenience, neighbourhood and to a
certain extent smaller community sized centres. The tenant mix of these types of shopping
centres is dominated by grocery stores and is not as wide ranging and as such customers
cannot do wide comparative shopping.
2) Comparative centres include larger community, minor regional, regional and super regional
sized centres. These centres have a wide range of tenant mix which enables customers to
compare many items such as fashion items and jewellery.
3) According to the merging parties the target properties together with Cavendish shall
constitute a (larger) regional shopping centre, post-merger.
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of comparative centres and other retail properties within close proximity of
Cavendish which will constrain the merged entity post-merger. These
properties include Kenilworth Centre, Ottery Centre, Blue Route Mall,
Golden Acre, Rosmead Shopping Centre, N1 Value Centre and others.
15.The Commission therefore concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in the market for
rentable retail comparative centres as there are numerous other
alternative retail properties within a 15km radius of Cavendish.
The market for rentable industrial property
16.The two industrial properties that Woolworths intends to acquire from
OMLACSA are located in Montague Gardens and Milnerton, Cape Town.
As Woolworths already owns two industrial properties in Montague
Gardens which are within a 10km radius of the target properties, the
Commission identified a horizontal overlap in respect of industrial property
within a 10km radius. The Commission found that Woolworths’ post-
merger market share will be approximately 2% and that Woolworths will
still continue to face competition from several competitor industrial
properties within the identified 10km radius such as Spearhead Business
Park, Fortune Park, Bridge Park, Montague Square and others. The
Commission therefore concluded that the proposed transaction is unlikely
to substantially prevent or lessen competition in the market for rentable
industrial property.
Coordinated Effects
17.The Commission further considered whether this transaction could be
used by the merging parties to facilitate the exchange of commercially
sensitive information to the detriment of competition as the parties are
exchanging assets related to markets in which they are already active. The
Commission, however, found that coordination is unlikely given that the
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parties are swopping assets which are in different products markets, i.e.
OMLACSA and BVI are acquiring convenience centres whereas
Woolworths is acquiring industrial properties. Further, both the
comparative retail and industrial markets are not concentrated and
sensitive information such as rental prices is publicly available in both
markets.
Public interest
18.The merging parties confirmed that the proposed transaction will have no
adverse effect on employment and will not result in any retrenchments in
South Africa.4) The proposed transaction raises no other public interest
concerns.
Conclusion
19.For the reasons mentioned above, we approve the proposed transaction
unconditionally.
________________ 30 October 2013
Mondo Mazwai Date
Medi Mokuena and Fiona Tregenna concurring
Tribunal researcher: Ipeleng Selaledi
For the merging parties: Roxanne Ker of Walkers Inc
For the Commission: Grashum Mutizwa
4) See merger record, pages 59 - 63. Also see paragraph 8.1 of the Commission’s merger
report.