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[2014] ZACT 61
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Business Venture Investments No. 1697 (Pty) Ltd and Another v Menlyn Maine Investments Holdings (Pty) Ltd (018903) [2014] ZACT 61 (13 August 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018903
In the matter
between:
Business Venture
Investments No.
1697
.................................................................................
Acquiring
Firms
(Pty) Ltd and
Government Employees
Pension Fund
And
Menlyn Maine
Investment Holdings (Pty)
Ltd
..............................................................................
Target
Firm
Panel : Norman
Manoim (Presiding Member)
Yasmin Carrim
(Tribunal Member)
Medi Mokuena
(Tribunal Member)
Heard on: 13 August
2014
Order issued on: 13
August 2014
Reasons issued on :
10 September 2014
Reasons for
Decision
Approval
1. On 13 August 2014
the Competition Tribunal (the “Tribunal”) unconditionally
approved an acquisition by Business Venture
Investments No. 1697
(Pty) Ltd (“BVI”) and the Government Employees Pension
Fund (“GEPF”) of Menlyn Maine
Investment Holdings (Pty)
Ltd (“Menlyn Maine”).
2. The reasons for
the approval of the proposed transaction follow.
3. The primary
acquiring firms are BIV and the GEPF. BVI is 100% controlled Billy
Lesedi Masetlha (“Masetlha”). BVI
does not directly or
indirectly control any firms. The GEPF is controlled by the GEPF
Board of Trustees comprising of 16 Trustees
appointed in terms
section 6 of the Government Employee Pension Law of 1996. The GEPF
controls the following firms: ADR International
Airports South Africa
(Pty) Ltd (“ADR”), Pareto Ltd (“Pareto”),
Business Venture Investments (Pty) Ltd
(“Business Venture”),
Community Property Fund (“CPF”), CBS Property Portfolio
(Pty) Ltd (“CBS”)
and Lexshell 44 General Trading (Pty)
Ltd (“Lexshell").
4. BVI is newly
incorporated and has not traded before and therefore does not provide
any products or services. The GEPF’s
core business is to manage
and administer pension funds and other benefits for government
employees thorough investments in four
classes of assets, i.e.
equities, property, fixed income and Isibaya fund.
5.
Relevant for this transaction is the GEPF’s ownership of a
Grade P office property, namely Riverwalk Office Park, situated
in
Ashlea Gardens, Pretoria.
1
6.
The primary target firm is Menlyn Maine, a firm incorporated in terms
of the Laws of the Republic of South Africa. Menlyn Maine
is jointly
controlled by African Spirit Trading 309 (Pty) Ltd (“African
Spirit 309”) and African Spirit Trading 306
(Pty) Ltd (“African
Spirit 306”). African Spirit 309 and African Spirit 306 each
have 28.17% shareholding in Menlyn
Maine. The remaining
non-controlling shares are held by BVI (25.01
%)
and
the GEPF (18.65%). Menlyn Maine directly controls Applewood Trading
80 (Pty) Ltd and Business Venture Investment Holdings 1565
(Pty) Ltd.
7. Menlyn Maine is a
firm which acquires, develops and/or co-deve!ops properties in South
Africa. It owns half of an office block
known as the Pegasus office
block which is currently under construction. The Pegasus office block
is situated in Menlyn, Pretoria
and will constitute rentable Grade P
office property. In addition, Menlyn Maine is the developer of a
mixed-use property development
known as Menlyn Maine Precinct. Menlyn
Maine Precinct is located in Waterkloof, Pretoria, and will consist
of residential, retail
and offices premises as well as restaurants, a
gym, spa, hotel and medical facilities.
Proposed
transaction and rationale
8. Prior to February
2014, African Spirit 309 and African Spirit 306 jointly controlled
Menlyn Maine, with each holding 50% shareholding.
In February 2014
BVl and the GEPF subscribed for 25.01% and 18.65% shareholding
respectively in Menlyn Maine. The shareholdings
of the two African
Spirit companies were diluted to the present 28.17% each. This
acquisition was not notified at the time. The
reason for not
notifying the transaction according to the parties was that BVl’s
25.01% and the GEPF’s 18.65% shareholding
in Menlyn Maine did
not confer any form of control in them over Menlyn Maine.
9. In this proposed
transaction there is no change to the respective shareholdings in
Menlyn Maine, they remain as they were in
February 2014. The reason
the transaction is now considered notifiable by the merging parties
is that shareholders intend to amend
the existing Memorandum of
Incorporation (“MOI”) to afford BVl and the GEPF with
certain minority protection rights
in Menlyn Maine. These minority
protection rights give each shareholder a veto over certain
resolutions and hence each could be
considered a joint controller.
Hence, post-merger, Menlyn Maine will be jointly controlled by
African Spirit 309, African Spirit
306, BVl and the GEPF.
10.The rationale for
BVI and the GEPF is that they want to protect their respective
interests and ensure that they are part of the
strategic decision
making within Menlyn Maine.
11. Menlyn Maine
submitted that it requires the support and close cooperation of both
BVI and the GEPF to strategically position
it “going forward
and to ensure its future growth and stability.
Competition
Analysis
12.The Commission
identified a horizontal overlap between the activities of the merging
parties in respect of the market for rentable
Grade P office
property. In relation to the relevant geographic market, the
Commission considered the competitive effects of this
transaction
within a 5 kilometer radius from Menlyn Maine. This area includes the
following nodes: Menlyn, Faerie Glen, Ashlea
Gardens, Lynnwood, Menlo
Park and Hazel Wood nodes.
13.
In relation to market shares, the Commission not only considered the
merging parties’ current market shares, but also
took into
account potential office property developments that would commence in
the future at Menlyn Maine Precinct. The Commission
estimated that
the merging parties’ post-merger market shares for future
rentable Grade P office developments in the Menlyn
Maine Precinct and
surroundings are approximately 42.4%, although the accretion is
insignificant. The Commission however found
that the merger is
unlikely to substantially prevent or lessen competition in the market
for rentable Grade P office in the future
because several of th'ê
competitors own land in the same area and have developments rights
for office property. Thus even
though the present market share is
high, the potential for future development by credible competitors
appears timely, likely and
sufficient to constrain any post-merger
exercise of market power.
2
Public interest
14.The
merging parties confirmed that the proposed
transaction will have no adverse effect on employment and will
not
result in any retrenchments in South Africa.
3
The proposed transaction raises no other public interest concerns.
Conclusion
15. For the reasons
mentioned above, we approve the proposed transaction unconditionally.
10
September 2014
Date
Mr. Norman Manoim
Ms. Yasmin Carrim
and Mrs Medi Mokuena concurring
Tribunal researcher:
Ipeleng Selaledi
For the merging
parties: Ahmore Burger-Smidt of Werksmans
For the Commission:
Grace Mohamed
1
For
a list of all the properties owned by the GEPF see Annexure CR1.
2
About
57% of the market belongs to competitors such as Neo Trend, Eris
Property Group and Metro Investments who own these rights.
3
See
merger record, pages 11. Also see paragraph 8 of the Commission’s
merger report.