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[2014] ZACT 51
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Masstores (Pty) Ltd v Darryl Investments (Pty) Ltd (019067) [2014] ZACT 51 (4 August 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 019067
In
the matter between:
MASSTORES
(PTY)
LTD
Primary Acquiring Firm
And
DARRYL
INVESTMENTS (PTY)
LTD
Primary Target Firm
Panel
Ms
Y Carrim (Presiding Member)
Dr
T Madima (Tribunal Member)
Ms
A Ndoni (Tribunal Member)
Heard
on
9 July 2014
Order
Issued on 9 July 2014
Reasons
Issued on 4 August 2014
Reasons
for Decision
Approval
[1
] On 9 July 2014, The Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by Masstores (Pty)
Ltd
(“Masstores”) to acquire the entire issued share capital
and all of the claims against Darryl Investments (Pty)
Ltd (“Darryl
Investments”).
[2]
The reasons for approving the proposed
transaction follow.
Parties
to the transaction
[3]
The primary acquiring firm is Masstores
a wholly owned subsidiary of Massmart Holdings Limited (“Massmart”),
which is
a company listed on the Johannesburg Securities Exchange.
Massmart is 52.4% controlled by Wal- mart Stores Inc. (“Wal-mart”)
and the remaining 47.6% is spread widely. Wal- mart is a public firm
listed on the New York Stock Exchange and is not controlled
by any
single firm. Wal-mart does not control any other firm in South Africa
(“SA”). Masstores controls numerous firms
in SA such as
Massfund (Pty) Ltd, Massmart Trade (Pty) Ltd, Massmart Travel
Services (Pty) Ltd and Servestar (Pty) Ltd, collectively
referred to
as the Massmart Group.
[4]
The primary target firm Darryl
Investments is controlled by Tiber Developments (Pty) Ltd (Tiber
Developments”). Tiber Developments
does not control any firm.
Proposed
Transaction
[5]
Masstores intends to acquire the entire
issued share capital and all of the claims against Darryl
Investments. Post-merger Masstores
will have sole control over Darryl
Investments.
Rationale
[6]
Masstores
is the sole occupier of the space in the building and has been in
occupation since 1991 and it intends to remain there
for the
foreseeable future. Masstores intends to work with Devco, this is a
development project between Brass Peak Trading and
Darryl Investments
to conceptualise the structure development proposal in respect of
development of bulk vacant land attaching
to the properties and the
re-development of properties.
[1]
Devco has access to the resources to undertake the development of the
bulk vacant land. For Darryl Investments the shareholders
of Tiber
Developments have mandated their board of directors to negotiate the
disposal of the entire property portfolio and any
other portfolio’s
held by their subsidiaries in order to create liquidity for the
shareholders to maximise shareholder value.
Relevant
Market and Impact on Competition
[7]
Massmart comprises of firms that are
involved in wholesale and retail of general merchandise, liquor, home
improvement equipment
and basic foods supply using its four
divisions; Massdiscounters, Masswarehouse, Massbuild and Masscash.
[8]
Darryl
Investments is a property holding firm which owns The White House
property measuring 15 158m
[2]
and Masstores property measuring 1 749m
2
,
both are B-Grade office properties. Darryl Investments also owns the
Remaining extent Erf 898 measuring 900m
2
,
this is currently vacant land used as a parking lot and there are no
current plans to develop in Peltier Drive, Sunninghill, Johannesburg.
Collectively the properties are referred to as Target Properties and
are exclusively used by Masstores.
[9]
Darryl Investments is active in the
market for the provision of rentable B- Grade office space in the
Sunninghill node.
[10]
There are no horizontal overlaps arising
in the activities of the merging parties. Darryl Investments
properties are classified
as B-Grade office properties and it does
not own any other properties other than the Target Properties and its
only tenant is Masstores.
The Massmart Group comprises of firms
involved in the wholesale and retail and it is not involved in the
leasing of property. The
proposed transaction does result in vertical
integration in that Masstores leases office space from Darryl
Investments. Masstores
has been occupying the properties since 1991
and the existing exclusive agreement stipulates that Masstores will
not lease the
Target Property to any other third parties. Masstores
will also continue to occupy the property exclusively. The Commission
is
however satisfied that the transaction is unlikely to result in
any vertical foreclosure concerns.
[11]
The Commission also considered the
effect on employment and Darryl Investment does not have any
employees. Massmart employees are
represented by South African
Commercial, Catering and Allied Workers Union. SACCAWU was informed
of the merger but this is an indirect
acquisition of the target
properties which Masstores intends to occupy postmerger as such
the Commission is of the view that
the proposed transaction is
unlikely to raise any public interest concerns.
Conclusion
[12]
In light of the above we conclude that
the proposed transaction is unlikely to substantially prevent or
lessen competition in the
market for the provision of rentable
B-Grade office space in the Sunninghill node. In addition, no public
interest issues arise
from the proposed transaction. Accordingly we
approve the proposed transaction unconditionally.
4
August 2014
DATE
______________________
Ms
Y Carrim
Dr
T Madima and Ms A Ndoni concurring
Tribunal
Researcher:
Moleboheng Moleko
For
the merging parties: Chris
Charter – DLA Cliffe Dekker Hofmeyr
For
the Commission:
Hardin Ratshisusu, Seema Nunkoo, Xolela Nokele
and Dineo Mashego.
[1]
In terms of the project, Brass have right of first refusal to
implement a development project with respect to
Target
Properties. The extension, if implemented will involve an addition
of offices for exclusive use of Masstores.