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[2014] ZACT 94
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Fountainhead Property Trust Collective Investment Scheme in Property v Robor (Pty) Ltd (018796) [2014] ZACT 94 (2 July 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018796
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, Í 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
DATE
Dr
T Madima
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.