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[2014] ZACT 23
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Acucap Properties Ltd v Sycom Property Fund Collective Investment Scheme in Property, Represented by FirstRand Bank Ltd as Trustee (018168) [2014] ZACT 23 (27 February 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018168
In
the matter between:
Acucap
Properties
Ltd
Acquiring Firm
And
Sycom
Property Fund Collective Investment
Target
Firm
Scheme
in Property, Represented by FirstRand Bank Ltd as Trustee
Panel : Norman
Manoim (Presiding Member)
Yasmin
Carrim (Tribunal Member)
Takalani
Madima (Tribunal Member)
Heard
on :
29 January 2014
Order
issued on :
29 January 2014
Reasons
issued on :
27 February 2014
Reasons
for Decision
Approval
1.
On 29 January 2014 the Competition
Tribunal (the “Tribunal”) unconditionally approved an
acquisition by Acucap Properties
Ltd (“Acucap”) of Sycom
Property Fund Collective Investment Scheme in Property (“Sycom”),
represented by
FirstRand Bank Ltd (“FirstRand”).
2.
The reasons for the approval of the
proposed transaction follow.
The
Parties and their activities
3.
The primary acquiring firm is Acucap, a
property loan stock company listed on the Johannesburg Stock
Exchange. Acucap is a public
listed company and accordingly is not
controlled by any single entity. Acucap’s six largest
shareholders are: the Government
Employee Pension Fund (12.2%),
Directors and Employees (9.1%), Investec Asset Management (6.6%),
Stanlib (8.9%), Old Mutual Asset
Management (5.4%) and Nedbank
(5.0%). Acucap has a 33.33% interest in Roeland Street Investments
(Pty) Ltd, a company involved
in the letting of self-storage space.
Acucap also has a 33.5% interest in Sycom and wholly owns Sycom’s
management company,
namely, Sycom Property Fund Management (Pty) Ltd
(“SPFM”).
4.
Acucap owns numerous office, retail and
industrial properties throughout South Africa. Further, Acucap
performs Sycom’s asset
management services and retains day to
day control of Sycom’s Assets.
5.
The
primary target firm is Sycom, a collective investment scheme in
property. Sycom is listed on the Johannesburg Stock Exchange
and is
classified as a Real Estate Investment Trust. FirstRand has been
appointed as trustee of Sycom in terms of the provisions
of the
Collective Investment Schemes Control Act 45 of 2002
.
[1]
Sycom’s major shareholding, as at the date of the merger
filing, that hold more than 5% of its shares are: Acucap (33.5%),
Stanlib (8.9%), the Government Employee Pension Fund (6.7%) and Old
Mutual Asset Management (5.6%). Sycom’s shareholding
largely
overlaps with that of Acucap.
Proposed
transaction and rationale
6.
Acucap intends to acquire 100% of the
shareholding in Sycom. According to the merging parties, this will be
achieved through one
or more different transactions, including
once-off transactions with individual sellers, the underwriting of
Sycom’s rights
in issue, open market transactions and general
offers to all Sycom shareholders and/or a scheme of arrangement.
These transactions
will inevitably lead to Acucap owning more than
50% of the shareholding in Sycom, thus granting Acucap sole control
over Sycom.
7.
Acucap submitted that since acquiring a
shareholding in Sycom its intention has always been to combine the
two firms into a single
investment entity. Acucap further submitted
that the size of combined entity will offer investors benefits such
as inter alia,
(i) an increased free float in Acucap units that will
move the fund up the property index and thus improve the funds
ratings and
(ii) a stronger balance sheet that will give Acucap a
greater acquisition capacity.
8.
The rationale for Sycom is that it has
similar portfolios with Acucap and from a management perspective, the
two firms are already
effectively managed as one entity.
Competition
Analysis
9.
The Commission identified a horizontal
overlap between the activities of the merging parties in respect of
the market for rentable
retail space and rentable Grade A office
space.
10.
Although both firms own retail
properties in the Gauteng and Western Cape that may be considered
substitutes, the distance between
them was such the Commission did
not consider them to be in the same geographic market for competition
purposes applying a standard
norm for the industry. Of the properties
concerned, the nearest was 37 kilometers from the similar property of
the other party
to the merger.
11.
In the market for rentable Grade A
office space the Commission identified horizontal overlaps within the
following nodes: Bryanston,
Sandton/lllovo, Waterfront/Cape Town CBD
and Bellville. The Commission found that the merging parties’
post-merger markets
shares in all these nodes are between 4% and 10%.
The Commission, however, noted that as Acucap already effectively
controls Sycom,
any market share accretion is purely academic. The
Commission therefore concluded that the proposed merger is unlikely
to substantially
prevent or lessen competition within the relevant
markets. We agree with this approach.
Public
interest
12.
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.
[2]
The proposed transaction raises no other public interest concerns.
Conclusion
13.
For the reasons mentioned above, we
approve the proposed transaction unconditionally.
27
February 2014
Date
Mr.
Norman
Manoim
Ms.
Yasmin Carrim and Mr. Takalani Madima concurring
Tribunal
researcher: Ipeleng Selaledi
For
the merging parties: Vani Chetty of Vani Chetty Competition Law
For
the Commission: Jatheen Bhima
[1]
The merging parties indicated that this appointment does not confer
any form of control to
FirstRand
for the purposes of the Act.
[2]
See merger record, pages 20. Also see paragraph 7 of the
Commission’s merger report.