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[2014] ZACT 57
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Growthpoint Properties Ltd v Truzen 75 Trust and Others (019208) [2014] ZACT 57 (29 August 2014)
COMPETSTION
TRIBUNAL OF SOUTH AFRICA
Case
No: 019208
In
the matter between:
GROWTHPOINT
PROPERTIES
LTD
Primary Acquiring Firm(s)
And
TRUZEN
75 TRUST AND
ERVEN
99 AND 100 PARKTOWN TOWNSHIP
SHAREBLOCK
(PTY)
LTD
Primary
Target Firm(s)
Panel
Norman Manoim (Presiding Member)
Yasmin
Carrim(Tribunal Member)
Imraan
Vaiodia (Tribunal Member)
Heard
on
20 August 2014
Order
Issued on 20 August 2014
Reasons
Issued on 29 August 2014
Reasons
for Decision
Approval
[1]
On 20 August 2014 the Competition
Tribunal (“Tribunal”) unconditionally approved an
acquisition by Growthpoint Properties
Limited of a 50% interest in
the Truzen 75 Trust and 50% of the shares in Erven 99 and 100
Parktown Township Share Block (Pty)
Ltd.
Parties
to the Transaction
Primary
acquiring firm
[3]
The
primary acquiring firm is Growth point Properties Limited (“Growth
point”). Growthpoint is a property investment
holding company
and is listed as a real estate investment trust (REIT) on the
Johannesburg Securities Exchange with its shares
widely dispersed.
[1]
Growthpoint’s property portfolio comprises rentable office,
retail and industrial space situated throughout South Africa.
Primary
target firm
[4]
The primary target firm is the remaining
50% (i.e. the 50% Growthpoint does not own pre-merger) in a property
portfolio held by
the beneficiaries of the Truzen 75 Trust (“Truzen
Trust”) and the shareholders of Erven 99 and 100 Parktown
Township
Share Block (Pty) Ltd (“Parktown Share Block”)
(collectively “the Target Properties”). The Target
Properties
are essentially rentable office space situated in
Parktown, Johannesburg.
Proposed
Transaction
[5]
Earlier
this year, the Tribunal unconditionally approved a merger in terms of
which Growthpoint acquired, inter aiia, 50% of the
interests in the
Truzen Trust and 50% of the share capital of the Parktown Share
Block
[2]
(“The Previous
Transaction”) The transaction before us now is essentially a
follow- on transaction in terms of which
Growthpoint seeks to
increase its 50% holding to 100%.
[6]
The proposed transaction is structured
as two indivisible and interdependent Sale Agreements; the first
between Growthpoint and
the beneficiaries of the Truzen Trust and the
second between Growthpoint and the shareholders of the Parktown Share
Block.
Rationale
[7]
Growthpoint submits that the acquisition is in time
with its strategy of “
making dividend
enhancing acquisitions and provides Growthpoint with a strategic
interest in and direct exposure to the Target Companies’
retail
and office portfolios.”
[8]
The target firms submit that the
disposal is in line with their strategy of making long term
investments and selling them at a profit
for use in future
endeavours.
Relevant
Market and Competition Analysis
[9]
Both the merging parties and the
Competition Commission (“Commission”) identified an
overlap in the market for the provision
of rentable A-grade office
space in the Parktown node and thus considered the effect of the
transaction on that market.
[10]
The merging parties submit that the
transaction causes their market share to increase from around 18% to
24%. This submission is
in fact incorrect since Growthpoint is
considered to control the target firms pre-merger and there is thus
no accretion in the
true sense.
[11]
The
Commission submits that the merged entity will enjoy a market share
in the region of 28.5% but remains unconcerned due to the
fact that
Growthpoint is considered to control the Target Properties pre-merger
in terms of its shareholding
[3]
and submits that the competitive landscape and Growthpoint’s
position have remained largely unchanged as a result of this
transaction.
[12]
With Growthpoint exercising control
pre-merger, the question to be asked then is whether Growthpoint’s
incentive, due to the
change in the nature of its
control,
is likely to be altered by the merger. The Commission’s
investigation revealed that Growthpoint already exercised
management
control
pre-merger and that this
includes, but is not limited to, the preparation and implementation
of marketing strategies, the sourcing
of and negotiating with
tenants, and the conclusion of lease agreements. The Commission thus
concluded, a finding with which we
concur, that the shift to sole
control is unlikely to alter Growthpoint’s incentives
whatsoever.
Public
Interest
[13]
The proposed transaction has no effect
on employment or any other public interest consideration and thus
demand no further consideration.
Conclusion
[14]
In light of the above we conclude that
the proposed transaction is unlikely to substantially prevent or
lessen competition in the
relevant market. Accordingly, we approve
the transaction unconditionally.
29
August 2014
DATE
MS
YASMIN CARRIM
Mr
Norman Manoim and Prof Imraan Valodia concurring
Tribunal
Researcher: Shannon Quinn
For
the merging parties: Johan Coetzee of Glyn Marais Inc.
For
the Commission: Dineo Mashego
[1]
There is just one shareholder in Growthpoint holding more than 5% of
the issued shares, the Government Employees Pension Fund
(GEPF)
[2]
This
was in terms of Case No 018143.
[3]
The aforementioned previous transaction (Case No. 018413) was
assessed on the basis of Growthpoint exercising control over the
Target Firms.