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[2014] ZACT 55
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First Rand Ltd NO as trustee for the time being of the Emira Property Fund v Intergri-T Property Fund Ltd in respect of Omnicron Investments 005 (Pty) Ltd and Others (019133) [2014] ZACT 55 (27 August 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 019133
In
the matter between:
FIRST
RAND LIMITED N.O. AS TRUSTEE FOR THE TIME BEING OF THE EMIRA PROPERTY
FUND
Primary Acquiring Firm
And
INTERGRI-T
PROPERTY FUND LTD IN RESPECT OF OMNICRON INVESTMENTS 005 (PTY) LTD,
LOWMER
INVESTMENTS 005 (PTY) LTD,
RAPIDOUGH
PROPERTIES 509 (PTY) LTD,
LIBRA
INVESTMENTS 5 (PTY) LTD,
AQUARELLA
INVESTMENTS 272 (PTY) LTD AND
AD
AMASS INVESTMENTS 5 (PTY)
LTD
Primary Target Firm
Panel
N Manoim (Presiding Member)
Y
Carrim (Tribunal Member)
M
Mokuena (Tribunal Member)
Heard
on
13 August 2014
Order
Issued on
13 August 2014
Reasons
Issued on
27 August 2014
Reasons
for Decision
Approval
[1]
On 13 August 2014, The Competition
Tribunal (“Tribunal”) unconditionally approved the
acquisition by First Rand Limited
N.O as trustee for the time being
of the Emira Property Fund (“EmIra”) to acquire
Intergri-T Property Fund Ltd (“Intergri-T”)
in respect of
Omnicron Investments 005 (Pty) Ltd, Lowmer Investments 005 (Pty) Ltd,
Rapidough Properties 509 (Pty) Ltd, Libra Investments
5 (Pty) Ltd,
Aquarella Investments 272 (Pty) Ltd and Ad am ass Investments 5 (Pty)
Ltd. The properties will be collectively referred
to as the Target
Firms.
[2]
The reasons for approving the proposed
transaction follow.
Parties
to the transaction
[3]
The primary acquiring firm is Emira, is
a portfolio created under the Emira Property Scheme in terms of the
Collective Investment
Scheme Control Act, 45 of 2002. It is listed on
the Real Estate Investment Trusts sector on the Johannesburg
Securities Exchange.
Emira shareholders with a holding of more than
5% include; Tiso Group, Old Mutual and Government Employee Pension
Fund. Emira is
administered by Strategic Real Estate Managers and
manages the fund subject to oversight of the Registrar and FirstRand.
[4]
Emira wholly controls Freestone Property
Holdings Limited (“FPH”), in turn FPH wholly owns
Freestone Property Investments
(Pty) Ltd and Arnold Properties (Pty)
Ltd. Arnold wholly owns the following subsidiaries; Azgold
Investments (Pty) Ltd, Backbone
Investments (Pty) Ltd, Kenview Share
Block (Pty) Ltd, No.9 Sturdee Holdings Share Block (Pty) Ltd, Paddy’s
Pad (2091) (Pty)
Ltd, Surgate Share Block (Pty) Ltd and Windrifter
Share Block (Pty) Ltd.
[5]
The Target Firms are all subsidiaries of
Intergri-T Property Fund Limited. The Target Firms do not control any
firm. The Target
firm owns the following properties; Makro in Crown
Mines, Tygervalley Health in Tygervailey, Waterside Place in
Tygervalley, Auditor
General in Brooklyn, Atlas Gardens in
Durbanville, Parklands Healthcare in Parklands, Steelpark in
Bellville and Roeicor in Kraaifontein.
Proposed
Transaction
[6]
Emira intends to acquire the entire
issued shares in the Target Firms. Postmerger Emira will have
sole control over the Target
Firms.
Rationale
[7]
Emira wishes to acquire high quality
properties and increase its exposure in the retail space within a
growing area in the Western
Cape. !ntegri-T wants to realise profits
on the capital that were injected into the company in 2008.
Relevant
Market and Impact on Competition
[8]
The acquiring group’s property
portfolio comprises of office, retail and industrial properties
located throughout South Africa.
Relevant for this transaction are
the properties located in Pretoria, Johannesburg and Cape Town. The
Target firms have a property
investment firm with a property
portfolio comprising of office, industrial and retail property which
are located in the Western
Cape and Gauteng provinces.
[9]
Emira and Intergri-T both participate in
the market for provision of office, retail and light industrial
property. However the Commission
found that in the market for
provision of retail property, the Target Firms property is a
speciality retail centre exclusively
leased to Makro and not open to
third parties. Furthermore the acquiring group’s retail
properties are classified as neighbourhood,
convenience and
community. The Commission is therefore of the view that the acquiring
groups retail properties are unlikely to
pose a competitive
constraint on the Target Firms property and thus the Commission wiil
not assess this market further.
Provision
of office property
[10]
In the market for provision of office
property in the Brooklyn/ Nieuw Muckleneuk/ Groenkloof/ Waterkloof
node, the Target firm owns
A-Grade property located in Brooklyn
whereas Emira owns A-Grade and B-Grade office properties located
within Brooklyn and Hatfield.
In this market Emira has a market share
of 8.6% and the Target Firms have a market share of 1.1%. Post-merger
the market share
of the merged entities will be 9.7%.
Provision
of industrial light space
[11]
In the market for provision of
industrial light space none of the merging parties’ properties
are located within the same
node. However the
Goodwood/Parow/Bellville node (where the Target firm has property) is
adjacent to the Epping/Airport/Langa node
(where the acquiring firm
has property). There is a likely geographic overlap. If you combine
these nodes Emira has a market share
of 10.2% and the Target Firms
have a market share of 5.7%, post-merger the market share of the
merged entities will be 15.9%. The
competitors overall will still
have 84.1% market share. The Commission viewed the market shares of
the merged entity as low and
concluded that the merger would not
significantly alter the structure of the market.
Public
Interest
[12]
The Commission identified a concern in
relation to employment, 3 employees are likely to lose their jobs as
a result of the merger.
The 3 employees will not be transferred with
the business to Emira. The Commission was concerned that the
employees are unskilled
and may not be able to find alternative
employment in the short run should the employees not be retained. One
of the employees
has already secured employment with a third party
and negotiations are still under way to ensure that the 2 other
employees are
retained within Intergri-T.[13]
In order to ease the Commission’s
concerns in the interim whilst the board still Intergri-T deliberates
the following undertaking
has been made by Intergri-T to the
Commission;
7
confirm that Intergri-T Property Fund Limited has undertaken to
provide the empioyees identified below, employed within the
Intergri-T
group, will not be retrenched as a result of the merger...
”
[14]
The undertaking ensures that the 2
employees are not retrenched for a 2 year period within Intergri-T or
an alternative division
within the group. The Commission is therefore
satisfied with the undertaking and has decided not to impose a
condition to the merger.
Conclusion
[15]
In light of the above we concluded that
the proposed transaction was unlikely to substantially prevent or
lessen competition. In
addition, no other public
interest
issues arise from the proposed transaction. Accordingly we approved
the proposed transaction unconditionally.
27
August 2014
DATE
Mr
N Manoim
Ms
Y Carrim and Ms M Mokuena concurring
Tribunal
Researcher: Moleboheng Moleko
For
the merging parties: Albert Aukema - DLA Cliffe Dekker Hofmeyr
For
the Commission:
Dineo Mashego and Xolela
Nokele