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[2014] ZACT 26
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Redefine Properties Ltd v Grapnel Property Investments Pty Ltd in respect of the property letting enterprise known as Ericsson Building (018424) [2014] ZACT 26 (13 February 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case
No.018424
In
the matter between:
Redefine
Properties
Limited
Primary Acquiring Firm
and
Grapnel
Property Investments
Proprietary
Primary Target Firm
Limited
in respect of the property letting enterprise known as Ericsson
Building
Reasons
for Decision
Panel
N Manoim (Presiding Member), T Madima (Tribunal Member) and M Mokuena
(Tribunal Member)
Heard
on
05 February 2014
Decided
on
05 February 2014
Reasons
issued on:
13
February 2014
Approval
On
05 February 2014, the Competition Tribunal (“Tribunal”)
approved the merger between Redefine Properties Ltd (“Redefine”)
and Grapnel Property Investments (Pty) Ltd “Grapnel”), in
respect of the Property Letting Enterprise known as Ericsson
Building(“Target Property”). The reasons for approving
the proposed transaction follow below.
Parties
to the transaction
[1]
The primary acquiring firm is Redefine,
a property loan stock company listed on the Johannesburg Stock
Exchange. Redefine’s
property portfolio comprises of a
diversified range of properties which include office, retail and
industrial space situated throughout
the country.
[2]
The primary target firm is part of the
Grapnel Property Group, and is a privately owned business which
comprises of two core elements.
One being a property investment
company, and the other being a property services company. For
purposes of the proposed transaction
Grapnel’s ownership of the
Target Property is relevant. The Target Property is an office
building, although it also has a
small retail component used for
retail space and a gymnasium. The Target Property is located at
Kelvin Drive in Woodlands, Gauteng.
Proposed
transaction
[3]
Through a Sale Agreement, Redefine seeks
to acquire the Target Property from Grapnel which includes, the
property, buildings erected
on the property, fixed assets, leases and
all tenants deposits and guarantees from tenants. Such that post
merger, Redefine will
acquire sole control of the Target Property.
Relevant
markets and impact on competition
[4]
The
proposed transaction results in a horizontal overlap since both
parties are active in the provision of rentable Grade A office
space
in the Woodmead node in the Gauteng Region. Redefine owns two Grade A
offices in Woodmead, namely the Allhart Park and Accenture
Woodmead.
As such, there is a geographical overlap that arises from the
proposed transaction.
[5]
The
Commission’s findings was that the proposed transaction will
not result in any competition concerns as the post-merger
market
shares of
the Merging Parties will be less than 6%. Clearly showing that post
merger the merged entity will face significant competition
from
competitors such as Growthpoint, Acucap and Investec amongst
others.
[1]
[6]
In
relation to the market for rentable retail space, the proposed
transaction will not have a negative impact on the market, as
Redefine’s rentable retail space Pro-Shop, in the Woodmead node
is categorised as a neighbourhood centre, whilst the Target
Property’s rentable retail property is categorised as a small
free standing centre.
[2]
[7]
The Commission’s approach here is
formalistic and assumes the target premises have multiple tenants
with weak bargaining power.
However the most important fact in this
merger is that there is a single tenant, Ericsson that rents the
entire target property.
The tenant has a lease until 2016. After that
date we are told, there will have to be a re-negotiation. Given that
the tenant rents
the entire building it has sufficient bargaining
power with the merged firm to prevent it from using its ownership of
other properties
in the area from exercising market power over it.
The merger for this reason raises no competition concerns.
Public Interest
[8]
The
merging parties confirmed that the proposed transaction will have no
adverse effect on employment
[3]
and the proposed transaction raises no other public interest
concerns.
CONCLUSION
[9]
We accordingly approve the transaction
without conditions.
13
February 2014
DATE
Mr.
Norman Manoin
Dr.
Takalani Madima and Ms. Medi Mokuena concurring.
Tribunal
Researcher: For the merging parties: For the Commission:
Caroline
Sserufusa
Vani
Chetty of Vani Chetty Competition Law Clementine Mahlangu
[1]
See page 13 of the Commission’s Report.
[2]
See page 14 of the Commission’s Report.
[3]
See Merger record at pages 79-80.