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[2014] ZACT 14
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Redefine (Pty) Ltd v Annuity Properties Ltd Annuity Assets managers (Pty) Ltd And Annuity Property Managers (Pty) Ltd (018754) [2014] ZACT 14 (2 July 2014)
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 018754
DATE: 02 JULY 2014
In the matter between:
REDEFINE (PTY)
LTD
.................................................................
Primary
Acquiring Firm
And
ANNUITY PROPERTIES LTD, ANNUITY
ASSETS
MANAGERS (PTY) LTD AND ANNUITY
PROPERTY
MANAGERS (PTY)
LTD
...................................................................
Primary
Target Firm
Panel : Dr T Madima (Presiding
Member)
: Prof. F Tregenna (Tribunal Member)
: Mr A Roskam (Tribunal Member)
Heard on : 4 June 2014
Order Issued on : 4 June 2014
Reasons Issued on : 2 July 2014
Reasons for Decision
Approval
[1] On 4 June 2014, The Competition
Tribunal (“Tribunal”) unconditionally approved the
acquisition by Redefine (Pty)
Ltd (“Redefine”) to acquire
the entire issued linked unit capital of Annuity Properties Limited
(“Annuity”),
Annuity Asser Managers (Pty) Ltd (“Annuity
Assets Managers”) and Annuity Property Managers (Pty) Ltd
(“Annuity
Property Managers”).
[2] The reasons for approving the
proposed transaction follow hereunder.
Parties to the transaction
[3] The primary acquiring firm is
Redefine, a company listed on the “Diversified Real Estate
Investment Trusts” (“REIT”)
sector on the
Johannesburg Securities Exchange (“JSE”). Redefine’s
shareholders include; State Street (Custodian),
Stanlib, Government
Employees Pension Fund, Investec and Investment Solutions. Redefine
also controls various firms in South Africa,
the continent and
internationally.
[4] The primary target firms are
Annuity, Annuity Assets Managers and Annuity Property Managers.
Annuity is not controlled by any
firm. The beneficial unit¬holders
of Annuity include; Public Investment Corporation, Coronation Asset
Management and Grindrod
Asset Management.
[5] The shareholders of Annuity Asset
Managers and Annuity Property Managers include; Sasfin Private Equity
Fund Manager (Pty) Ltd,
Greenacres SA Investments LLC, The Helenko
Trust, The Daniel Rubenstein Family Trust, Panayiotis Theocharides,
Joshua Saul Benjamin
Greenberg, The Panico Theocharides Family Trust,
The Levfrie Trust and Seahorse SA Investments CC. Annuity, Annuity
Asset Managers
and Annuity Property Managers do not directly or
indirectly control any firm.
Proposed Transaction
[6] Redefine intends to acquire the
entire issued linked unit capital of Annuity by way of one or more
indivisibly inter-related
schemes of arrangement from the current
unit-holders of the Annuity linked units (“Scheme”).
Simultaneously
Redefine will also acquire all the
ordinary shares in and shareholder claims against Annuity Asset
Managers and Annuity Property
Managers.
Rationale
[7] The Scheme will enable the Redefine
Group to advance its investment strategy of expanding its local
property portfolio by acquiring
prime quality assets at attractive
yields through a single transaction. For Annuity the proposed
transaction provides its linked
unit-holders with an opportunity to
maximise and protect value in a volatile market by swapping to a
diversified large cap stock
at a premium. The transaction also
provides its linked unit¬holders with substantial exposure to
Redefine’s quality retail
and international property portfolio,
to an attractive development pipeline and a fund with significantly
superior liquidity.
Relevant Market and Impact on
Competition
[8] Redefine is a property loan stock
company which is listed on the JSE. Redefine property portfolio has a
diverse range of properties
such as office, retail and industrial
throughout South Africa.
[9] Annuity is also a property loan
stock company which is listed on the JSE in the “Diversified
REITS” sector. Annuity
has properties in Johannesburg, Durban
and Cape Town. Annuity Asset Managers provides exclusive asset
management assets services
to Annuity and Annuity Property Managers
provides exclusive property management services to Annuity.
[10] The proposed transaction does
result in horizontal overlap arising in relation to provision of
rentable A-Grade and B-Grade
office space within the Melrose/Waverly
node, Sandton and Environ node, Midrand node, Constantia node and in
the market for rentable
light industrial space in Ormonde, Riverlea
and Crown node.
[11] Redefine and Annuity Asset
Managers and Annuity Property Managers both offer their services
exclusively to Annuity and Redefine
and not to any other companies
and/or competitors. This means post-merger, the competitors of
Annuity and Redefine will not be
foreclosed in the market for the
provision of asset and property management services and no input or
customer foreclosure will
arise.
[12] The relevant market is therefore
the provision of rentable A-Grade office property in the
Melrose/Waverly, Sandton and Environs,
Midrand and Constantia Kloof
nodes and light industrial space in the Ormonde/ Riverlea/.Crowri
node.
Rentable A -Grade office properties, in
the Melrose/Waverly node
[13] In the Melrose/Waverly node
Redefine has a market share of 4.06% and Annuity Properties has a
market share of 8.38%. The market
share post¬merger of Redefine
will increase to 12.76%. The merged entities will still have
competitors in the market such as
Growthpoint, Hyprop and Investec.
Rentable A -Grade office properties, in
the Sandton and Environs node
[14] In the Sandton and Environs node,
Redefine has a market share of 15.91% and Annuity has a market share
of 0.08%. The market
share post-merger of Redefine will increase to
15.99%. The merged entities will still have competitors such as
Growthpoint, Acucap,
Sycom, Tiber, Old Mutual, Zenprop and Vunani.
Rentable A -Grade office properties, in
the Midrand node
[15] In the Midrand node, Redefine has
a market share of 5.39% and Annuity Properties has a market share of
1.65%. The market share
post-merger of Redefine will increase to
7.04%. The merged entities will still have competitors such as
Shibbolet, Fedprop and
Investec.
Rentable A -Grade office properties, in
the Constantia Kloof node
[16] In the Constantia Kloof node,
Redefine has market share of 6.59% and Annuity has a market share of
1.32%. The market share
post-merger of Redefine will increase to
7.91%. The merged entities will still have competitors such Abland,
Growthpoint, Montagu
Property Group and Darle Investments.
Rentable Light Industrial space, in the
Ormonde/Riverlea/Crown node
[16] In the Ormonde/Riverlea/Crown
node, Redefine has market share of 1.55% and Annuity has a market
share of 1.11%. Post-merger
Redefine will have an estimated market
share of 2.93%. Some competitors in the market include Capital
Property Fund, Growthpoint
and Ash Brook Commercial Properties.
[17] The Commission considered the
market share accretions in the different nodes and it concluded that
there are all minimal accretions.
We are of the view that the
proposed transaction is unlikely to alter A-Grade office spaces in
the nodes as the competitors are
reputable and credible alternative
players are available. We are further of the view that currently
available office spaces will
also constrain the merged entity from
unilaterally increasing rental prices.
[18] The transaction will not have an
adverse effect on employment. None on the employees from Annuity
Property Management division
will be retrenched. Four employees of
Annuity Asset Managers will be retrenched but retrenchment packages
comprising of 12 months’
salary in advance have been offered
and the employees will be assisted to find new employment.
Conclusion
[19] 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 the Melrose/Waverly, Sandton and Environs, Midrand
and Constantia
Kloof nodes and light industrial space in
the Ormonde/Riveriea/Crown node. In
addition, no public interest issues arise from the proposed
transaction. Accordingly I approve
the proposed transaction
unconditionally.
2 July 2014
DrTMadima DATE Prof. F Tregenna and
Mr A Roskam concurring
Tribunal Researcher: Moleboheng
Moleko
For the merging parties: Vani Chetty
- Vani Chetty Competition Law
For the Commission: Hardin
Ratshisusu, Grace Mohamed and Tshegofatso Radinku.