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[2014] ZACT 15
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Fountainhead Property Trust Collective Investment Scheme in Property v Robor (Pty) Ltd (018796) [2014] ZACT 15 (2 July 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018796
DATE:
02 JULY 2014
In
the matter between:
FOUNTAINHEAD
PROPERTY TRUST COLLECTIVE
INVESTMENT
SCHEME
IN
PROPERTY
.................................
Primary
Acquiring Firm
And
ROBOR
(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 Fountainhead Property Trust Collective
Investment Scheme in Property for the Robor Building
from Robor (Pty)
Ltd.
[2]
The
reasons for approving the proposed transaction follow hereunder.
Parties
to the transaction
[3]
The
primary acquiring firm is Fountainhead Property Trust Collective
Investment Scheme in Property
(“Fountainhead”),
which
is represented by FirstRand Bank Ltd in its capacity as trustee.
Fountainhead is managed and controlled by Fountainhead Property
Trust
Management Ltd
(“Fountainhead
Manco”).
Fountainhead
Manco is wholly owned by Redefine Properties Ltd
(“Redefine”).
[4]
Redefine
is listed on the Johannesburg Securities Exchange and not controlled
by any firm. Redefine controls numerous firms such
as Madison
Property Fund Managers Ltd, Fountain Head Property Administration
(Pty) Ltd, Redefine Retail (Pty) Ltd and Redefine
Pacific
(Mauritius). The Fountainhead, Fountainhead Manco and Redefine are
collectively referred to as the Fountainhead Group.
[5]
The
primary target firm is the Robor Building
(“Target
Property”)
which
is owned by Robor (Pty) Ltd
(“Robor”).
Robor
shareholders include; RMB Ventures Six (Pty) Ltd, RBR Staff
Investment Holdings (Pty) Ltd, Blackstar (Cyprus) Investors Ltd
and
Management
[1]
.
Proposed
Transaction
[6]
Fountainhead
intends to acquire the Robor Building, which includes the buildings,
structures, infrastructure and all permanent fixtures,
fittings and
improvements on the property. Post-merger, Fountainhead wMI have sole
control over the Robor Building. Simultaneously
Fountainhead and
Robor have entered into an agreement of lease (“Leaseback
Agreement”) in terms of which Robor will
lease the Robor
Building from Fountainhead for a period of 10 years granting Robor
with a further option to renew the lease for
two consecutive periods
of 5 years.
Rationale
[7]
The
proposed transaction is in line with Fountainhead’s strategy of
acquiring high quality, income producing assets located
in primary
investment markets. The proposed merger offers Robor an opportunity
to create funds for the repurchase of Robor shares
in terms of the
Share Repurchase Agreement concluded between Robor and its
shareholders.
Relevant
Market and Impact on Competition
[8]
Fountainhead
is a closed-end property unit trust with a diverse range of retail,
industrial, hospitality and specialised commercial
properties in
major metropolitan areas throughout South Africa. Relevant for this
transaction are Fountainhead’s A-Grade
and B-Grade offices and
industrial properties.
[9]
Robor
is a tube and pipe manufacturing business that also stocks and
processes a range of steel products throughout Southern Africa.
Robor
is active in various industries such as mining, transport,
construction, engineering and manufacturing. The Robor Building
is
exclusively used by Robor for its own business operations.
[10]
The
proposed transaction results in two product overlaps between the
business activities of Fountainhead and Robor. The first of
which is
in relation to the market for the provision of rentable A-Grade
office space within the Elandsfontein and Bedfordview
and
Greenstone/Edenvale/Modderfontein
nodes.
The second is in relation to the market for the provision of B-Grade
space within the Elandsfontein and Bedfordview and
Greenstone/Edenvale/Modderfontein nodes.
[11]
The
relevant market is the market for the provision of rentable A-Grade
office property and B-Grade industrial property within the
Elandsfontein and Bedfordview and Greenstone/ Edenval
el
Modderfontein
nodes.
[12]
In
the market for the provision of rentable A-Grade office properties in
the Bedfordview and Greenstone/Edenvale/Modderfontein node,
Fountainhead has a total Gross Lettable Area
(“GLA”)
of
26 539m
2
and a market share of 14.28%. Post-merger Fountainhead will have a
total GLA of 30 415m
2
and an estimated market share of 16.37%, this is a 2.09% share
accretion. In the same node but in the provision of rentable B -
Grade office properties, Fountainhead has a total GLA of 19 362m
2
and a market share of 21.72%. Post-merger Fountainhead will have a
total GLA 19 770m
2
and an estimated market share of 22.17%, this is a 0.45% share
accretion.
[13]
The
Commission also contacted the tenants of the Fountainhead Group
located within the the Elandsfontein and Bedfordview and Greenstone/
Edenvale/ Modderfontein nodes. CIB Insurance indicated in this regard
that it does not consider the Elandsfontein area as an alternative
place to carry on its business. It did however submit that if it had
to relocate that it would it would consider doing so within
the
Bedfordview area only, as it is more convenient and accessible to its
employees and clients. Murray and Roberts also indicated
that they do
not view Elandsfontein as an alternative area for its business
operations. They further submitted that they would
not relocate to
Elandsfontein as it is an industrial area, whereas Bedfordview (where
they currently operate) is commercial. No
other concerns were
expressed by the tenants.
Conclusion
[15]
In light of the above, j conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition
in the market
for the provision of rentable A-Grade office property and B-Grade
Industrial property within the the Elandsfontein
and Bedfordview and
Greenstone/ Edenvale/ Modderfontein nodes. In addition, no public
interest issues arise from the proposed transaction.
Accordingly I
approve the proposed transaction unconditionally.
2
July 2014
Dr
T Madima DATE Prof F Tregenna and Mr Anton Roskam concurring
Tribunal
Researcher: Moleboheng Moleko
For
the merging parties: Vani Chetty - Vani Chetty Competition Law
For
the Commission: Hardin Ratshisusu, Nompucuko Nontombana,
Reabetswe
Molotsi and Werner Rysbergen.
[1]
Management comprises of the William Abraham Collins, Gordon Malcom
Gilmer, Glen Andrew Nolan,
Johann
Scholtz, Nico Schoeman, Andrew James Winter and Indiran Gouden.