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[2014] ZACT 103
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SA Retail Properties (Pty) Ltd v AFHCO Holdings (018762) [2014] ZACT 103 (16 July 2014)
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case
No: 018762
In
the matter between:
SA
RETAIL PROPERTIES (PTY)
LTD
Primary
Acquiring Firm
And
AFHCO
HOLDINGS
Primary Target
Firm
Panel
:
Mr A Roskam (Presiding Member)
: Prof. I Valodia (Tribunal Member)
: Prof. F Tregenna (Tribunal Member)
Heard
on
: 18 June 2014
Order
Issued on : 18 June 2014
Reasons
Issued on : 16 July 2014
Reasons
for Decision
Approval
[1]
On
18 June 2014, The Competition Tribunal
("Tribunal")
unconditionally approved the
acquisition by SA Retail (Pty) Ltd
("SA
Retail")
to acquire the entire
issued share capital in AFHCO Holdings (Pty) Ltd
("AFHCO").
Post- merger SA Corporate Real
Estate Fund
("SA Corp")
will have sole indirect control over
AFHCO.
[2]
The
reasons for approving the proposed transaction follow.
Parties to the transaction
[3]
The
primary acquiring firm is SA Retail, a wholly owned subsidiary of SA
Corporate Real Estate Fund Nominee
("SACN").
SACN is controlled by SA Corp, a
company listed on the Johannesburg Securities Exchange. SA Corp's
shareholders with an interest
of more than 5% include; Government
Employment Pension Fund, Coronation Fund Managers and Stanlib Asset
Management. SACN holds
100% shares in Blue Heron (Pty) Ltd, Dune Lark
Investments, Erf 84-85-86 Shakes Head (Ply) Ltd, Wood Ibis
Investments (Ply) Ltd,
Grey Heron Investments (Pty) Ltd, Whirlprops
25 (Ply) Ltd, Rock Kestel Investments (Ply) Ltd and Stonedell
Investments (Ply) Ltd.
SACN holds 75% shares in Umlazi Mega City
(Pty) ltd,
[4]
The
primary target firms is AFHCO, its shareholders include; IDEA Managed
Fund, Mr Wayne Plit and Ms Renney Plit, AFHCO holds 100%
interest in
various companies including AFHCO (Ply) Ltd
("AFHCO
Sub"),
AFHCO Property (Ply)
Ltd, Urban Housing Finance (Ply). Ltd and Protea Glen Housing (Pty)
Ltd. AFHCO Sub controls more than 11 companies,
Proposed
Transaction
[5]
SA
Corp through its subsidiary SA Retail intends to acquire the entire
issued share capital in AFHCO. Post-merger SA Corp will have
sole
indirect control over AFHCO.
Rationale
[6]
The
proposed transaction offers SA Corp the opportunity to acquire an
established and experienced management team in the residential
sector. For AFHCO shareholders the sale provides an opportunity to
realise their investment at an appropriate time in their careers.
Relevant
Market and Impact on Competition
[7]
SA
Retail group is a collective investment scheme which invests in
property (also known as a property unit trust). It has a total
of 134
properties that comprises of 26 retail properties, 89 industrial
properties and 19 office properties and they are all located
in the
Gauteng Province. Relevant for this transaction are the 124
properties.
[8]
AFHCO
is a property investment company that has a total of 62 properties
comprising of 27 residential properties, 31 retail properties,
1
light industrial property and 4 office properties mostly located
within the Johannesburg Central Business District
("CBD")
and Newtown.
[9]
The
proposed transaction does result in horizontal overlap arising in
relation to provision of B-Grade and C-Grade office space,
the market
for provision of rental)le retail space in convenience centres and
the market for provision of rentable space in light
industrial
property.
[10] In
the market for Grade B and C office properties 7 properties were
identified as overlapping
post the transaction. However, the
Competition Commission found that there is no geographic overlap in
the areas of rentable office
space in B-Grade and C-Grade and the
market for the provision of rentable space in light industrial
property. The B-Grade and C-Grade
properties. are not within the same
node as AFCHO, the B-Grade is within a 26km distance and the C
Grade office properties
are within a 5km distance.
[11]
The
Commission also considered the market for provision of rentable space
in retail property within the 6km distance of the Johannesburg
CBD
node. In this node SA Corp has a total GLA of 5506m' and a market
share of 2.2% and AFHCO has a total GLA of 40926 and a market
share
of 14.4%. SA Corp will have a post -merger market share of 16.6%. The
Commission found that the parties post-merger estimated
market shares
were not significant to raise competition concerns and competitors in
the market still have a market share of 83.4%
and a GLA of 246 213m
2
• Competitors include; Bel Air shopping centre (7.3%), Centro
Continental (6.0%), Thrupps Centre (5.4%) and Bramley shopping
centre.
[12]
In
the market of provision of rentable space in light industrial
property, the Commission found that none of the SA Corp properties
are located within the South-West Industrial node where AFHCO's one
property is located therefore there is no geographic overlap.
Conclusion
[12] In
light of the above we conclude that the proposed transaction is
unlikely ta substantially prevent
or lessen competition in the market
for provision of rentable of 8-Grade and C-Grade office space, the
market for provision of
rentable retail space in convenience centre
and the market for provision of rentable space in light industrial
property. In addition,
no public interest issues arise from the
proposed transaction. Accordingly we approve the proposed transaction
unconditionally.
Prof.
F Tregenna
Prof.
I Valodia and Mr A Roskam concurring
16 July 2014
DATE
Tribunal
Researcher:
Molebaheng Moleko
For
the merging parties:
Desmond Rudman - Webber Wentzel
For
the Commission:
Hardin Ratshisusu, Xolela Nokele,
Seema Nunkoo
and Dineo Mashego.