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[2014] ZACT 34
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Firstrand Bank Ltd No as trustees for the time being of the Emira Property Fund v Menly Corporate Park (Pty) Ltd (018721) [2014] ZACT 34 (18 June 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case No: 018721
In the matter between:
FIRSTRAND BANK LIMITED
N.O. AS
Primary Acquiring Firm
TRUSTEES FOR THE TIME
BEING OF THE EMIRA PROPERTY
FUND
And
MENLYN CORPORATE PARK
(PTY) LTD
Primary Target Firm
Panel
: Dr T
Madima (Presiding Member)
:
Ms A Ndoni (Tribunal Member)
:
Dr I Valodia (Tribunal Member)
Heard on
:
21 May
2014
Order Issued on
:
21
May 2014
Reasons Issued on
: 18 June
2014
Reasons for Decision
Approval
[1]
On 21 May 2014, The Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by First Rand Limited
N.O.
as Trustee for the Time being of the Emira Property Fund for all the
issued shares in the Menlyn Corporate Park (Pty) Ltd.
[2]
The reasons for approving the proposed transaction follow
hereunder.
Parties to the
transaction
[3]
The primary acquiring firm is First Rand Limited N.O. as
trustee for the time being of the Emira Property Fund (“Emira”),
a portfolio created under the Emira Property Scheme and listed on the
Real Estate Investment Trusts sector on the Johannesburg
Securities
Exchange.
[4]
Emira has various shareholders such as Tiso Group, Old Mutual
and Government Employment Pension Fund. Emira is administered by
Strategic
Real Estate Managers, it manages Emira subject to oversight
of the Registrar and FirstRand. Emira wholly controls Freestone
Property
Holdings Limited (“FPH”). FPH wholly owns
Freestone Property Investments (Pty) Ltd and Arnold Properties (Pty)
Ltd.
Arnold in turn wholly owns various subsidiaries.
[5]
The primary target firm is Menlyn Corporate Park (Pty) Ltd
(“MCP”). MCP is wholly owned by Feenstra Group (Pty) Ltd
(“Feenstra”). MCP owns the target property Menlyn
Corporate Park.
Proposed
Transaction and Rationale
[6]
Emira intends to acquire the entire issued shares in MCP and
through this control Emira will control the target property.
[7]
Emira wishes to acquire quality property in the growing area
of Menlyn. Feenstra wants to realise profit on the sale of the
property
and this affords it an opportunity to re-invests the
proceeds in other developments.
Relevant Market and
Impact on Competition
[8]
Emira owns a portfolio comprising of office, retail and
industrial properties located throughout South Africa. In Pretoria it
owns
more than 17 properties.
[9]
MCP owns the Target Property and two other properties in
Pretoria and Bloemfontein. However only the Target property in the
Menlyn
node forms part of the proposed transaction .
[10]
The proposed transaction does result in horizontal overlap in
regards to activities between the merging parties in respect of
lettable
A -Grade office space.
[11]
The relevant market is the provision of rentable A-Grade
office property in the Menlyn node.
[12]
In this market the merging parties market share wili increase
post transaction from 14% to 25%. The market share accretion is 11%,
the Commission viewed this as unlikely to substantially prevent or
lessen competition given that approximately 75% of the market
is held
by other competitors such as Growthpoint, Capital Properties, Hyprop
and Atterbury.
Countervailing
Powers
[13]
The Commission identified that the Menlyn node has a vacancy
rate of 7% and the merging parties having a vacancy rate of 8%. The
Commission further identified that the merged entity contributes
about 28% towards total vacant Gross Leasable Area (“GLA”)
in Menlyn while other competitors contribute 72%. This means that
competitors in the Menlyn area have more vacant space to lease
compared to the merged entities and therefore tenants will still have
alternative buildings available to lease from post-merger.
[14]
According to Emira its lease agreements contain escalation
rate clauses that restrict Emira from unilaterally increasing rental
amounts above the agreed escalation rate.
[15]
The Commission has recommended that all the above factors are
likely to deter the merged entity from charging higher rental prices
given that tenants will have options when choosing office space in
the area.
Conclusion
[16]
In light of the above I conclude that the proposed transaction
is unlikely to substantially prevent or lessen competition in the
market for provision of rentable A -Grade office property. In
addition, no public interest issues arise from the proposed
transaction.
Accordingly I approve the proposed transaction
unconditionally.
18 June 2014
DATE
___________________
Dr T Madima
Dr I Valodia and Ms A
Ndoni concurring
Tribunal Researcher:
Moleboheng Moleko
For the merging parties:
Albert Aukema and Andries Le Grange - Cliffe Dekker Hofmeyr
For the Commission:
Hardin Ratshisusu, Lindiwe Khumalo, Portia Bele and Mogau Aphane.