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[2014] ZACT 36
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Acuap Investments (Pty) Ltd and Another v Liberty Group Ltd , In respect of the Property letting enterprise known as Greenacres (018242) [2014] ZACT 36; [2014] 1 CPLR 48 (CT) (5 March 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case No: 018242
In the matter between:
Acucap Investments
(Pty) Ltd
and
Acquiring Firms
Sycom Property Fund
Collective Investment
Scheme in Property
And
Liberty Group Ltd, in
respect of
the
Target Firm
Property letting
enterprise known as
Greenacres
Panel :
Norman
Manoim (Presiding Member)
Takalani
Madima (Tribunal Member)
Imraan
Valodia (Tribunal Member)
Heard
on : 05
February 2014
Order issued
on : 05
February 2014
Reasons issued
on : 05
March 2014
Reasons for Decision
Approval
1.
On 05 February 2014 the Competition Tribunal (the “Tribunal”)
unconditionally approved an acquisition by Acucap Investments
(Pty)
Ltd (“Acucap Investments”) and Sycom Property Fund
Collective Investment Scheme in Property (“Sycom”)
of
Liberty Group Ltd (“Liberty”), in respect of the property
letting enterprise known as Greenacres.
2.
The reasons for the approval of the proposed transaction
follow.
The Parties and their
activities
3.
The primary acquiring firms are Acucap Investments, a property
loan stock company listed on the Johannesburg Securities Exchange
(“JSE”) in the Diversified REITS sector and Sycom, a
collective investment scheme in property listed on the JSE and
classified as a Real Estate Investment Trust. Acucap Investments is a
wholly owned subsidiary of Acucap Properties Ltd (“Acucap”).
4.
Acucap exercises control over Sycom in its capacity as the
management company, namely Sycom Property Fund Managers Ltd (“SPFM”).
Acucap Investments and Sycom are hereinafter referred to as the
“Acucap Group". The Acucap Group’s six largest
shareholders as of 27 September 2013 are: the Government Employee
Pension Fund (12.2%), Investec Asset Management (6.6%), Directors
and
Employees (9.1), Stanlib (5.4%), Old Mutual Asset Management (5.4%)
and Nedbank (5.0%). Acucap also has a 27.56% interest in
a property
called The Bridge, situated at the Nelson Mandela Bay Municipality,
Port Elizabeth (Eastern Cape Province).
5.
The Acucap Group’s property portfolio consists of
office, retail and industrial properties throughout South Africa. The
Bridge
is a minor regional retail centre measuring 43 969m2 and is
situated adjacent the primary target firm.
6.
The primary target firm is the Greenacres Shopping Centre
(“Greenacres”), a property letting enterprise comprising
of
38 863m2 of rentable retail space and 1 814m2 of rentable Grade B
office space. Greenacres is situated at the Nelson Mandela Bay
Municipality, Port Elizabeth (Eastern Cape Province), and is
classified as a minor regional retail shopping centre. Greenacres
is
controlled by Liberty, a long term insurance company. Liberty is a
wholly owned subsidiary of Liberty Holdings Ltd.
Proposed transaction
and rationale
7.
The Acucap Group intends to acquire equal undivided shares in
Greenacres. Following the implementation of the proposed transaction,
the Acucap Group will jointly control Greenacres.
8.
The Acucap Group submitted that that its objective is to grow
the size of its portfolio with large individually owned, low risk
acquisitions and this transaction provides it with an attractive
investment opportunity.
9.
Liberty submitted that its strategy is to invest in current
assets that will continue to grow and the sale of Greenacres will
realise
capital which will be reinvested into younger assets, with
high growth potential.
Competition Analysis
10.
The
Commission identified a horizontal overlap in the activities of the
merging parties in respect of rentable retail space and
Grade B
office space. In respect of rentable retail space, the Commission
found that Acucap’s 27.56% shareholding in The
Bridge does not
entitle it to any control or minority protection rights that would
grant it control in terms of the Act. The Commission
therefore
concluded that there is no geographic overlap in respect of rentable
retail space in Port Elizabeth. In respect of grade
B office space
the Commission also found that there is no geographic overlap as the
Acucap Group does not own any grade B offices
in Port Elizabeth.
11.
As the Acucap Group is entitled to board
representation on the management committee of the Bridge by virtue of
its 27.56%
shareholding, the likelihood of the proposed transaction
resulting in coordinated effects was also assessed. The merging
parties
indicated at the hearing that the other shareholders at the
Bridge are the Johannesburg Municipal Pension Fund with 52% and
Employees
Municipal Pension Fund with 17% and that each shareholder
is entitled to one member on the board per 10% shareholding.
Accordingly,
the Johannesburg Municipal Pension Fund has five members
on the board, the Employees Municipal Pension Fund has one member and
the Acucap Group has two members as already indicated.
12.
The Acucap Group further submitted that it cannot make
any decision regarding the Bridge or vote without the other
shareholders
being present, and specifically, whatever decision is
taken needs to be supported by the major shareholder, i.e.
Johannesburg Municipal
Pension Fund. Furthermore, the merging parties
submitted that the manager of the Bridge, namely, Broil Property
Management (“Broil”)
is (i) entirely independent with no
links to any of the shareholders, (ii) no communication may be sent
from one shareholder to
a tenant and anyone who wishes to rent the
property must go through Broil and (iii) even though the Acucap Group
may know of the
rentals at the Bridge it would not know the details
surrounding the rental negotiations.
13.
However, even if competitively sensitive information would be
shared between Greenacres and the Bridge, there are a number of
alternative
players within a 25km radius of Greenacres and a new
development, namely Baywest Mall, which will add to the available
rentable
retail space in Greenacres.
Public interest
14.
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.
[1]
The proposed transaction raises no other public interest concerns.
Conclusion
15.
For the reasons mentioned above, we approve the proposed
transaction unconditionally.
05 March 2014
Date
Mr. Norman
Manoim
Dr. Takalani Madima
and Mr. Imraan Valodia concurring
Tribunal researcher:
Ipeleng Selaledi
For the merging parties:
Van! Chetty of Vani Chetty Competition Law For the Commission:
Jatheen Bhima
[1]
See merger record, pages 27. Also see paragraph 7 of the
Commission’s merger report.