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[2015] ZACT 3
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AFHCO Holding (Pty) Ltd v Morulat Property Investments 4 (Pty) Ltd (020115) [2015] ZACT 3 (14 January 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020115
In the matter
between:
AFHCO
Holdings (Pty)
Ltd
..................................................................................
Primary
Acquiring Firm
And
Morulat
Property investments 4 (Pty)
Ltd
................................................................
Primary
Target Firm
Panel: Norman Manoim
(Presiding Member),
Anton Roskam
(Tribunal Member)
Yasmin Garrim
(Tribunal Member)
Heard on: 12
December 2014
Order issued on : 12
December 2014
Reasons issued on :
14 January 2015
Reasons for
Decision
Approval
[1] On 12 December
2014 the Competition Tribunal (“Tribunal”)
unconditionally approved the large merger between AFHCO
Holdings
(Pty) Limited (“AFHCO”) and Morulat Property Investments
4 (Pty) Ltd (“Morulat”). The reasons
for approving the
proposed transaction follow.
Parties to
transaction
[2] The primary
acquiring firm is AFHCO, a wholly-owned subsidiary of SA Corporate
Real Estate Fund (“SA Corporate”)
listed on the
Johannesburg Securities Exchange (“JSE”). SA Corporate is
a diversified real estate investment fund invested
in industrial,
office, residential and retail property primarily in the major
metropolitan centres of South Africa. AFHCO’s
property
portfolio is inner city based.
[3] The primary
target firm is Morulat, a firm incorporated in terms of the laws of
the Republic of South Africa. Morulat owns five
residential
properties with retail space (mixed use properties) located within
the Johannesburg Central Business District (“CBD”).
Proposed
transaction and rationale
[4]
The prosed transaction follows on from a previous transaction that
the Tribunal unconditionally approved, in terms of which
SA Corporate
acquired all of the issued shares of AFHCO (“original
transaction”).
1
Morulat which was a subsidiary of AFHCO prior to the original
transaction was excluded from it as the seller and purchaser could
not reach agreement on terms. Matters have changed since then and
hence the present merger. In terms of the current proposed
transaction
AFHCO intends to acquire 100% issued share capital of
Morulat, through a Sale of Shares and Claims Agreement. Post-merger,
AFHCO
will exercise sole control over Morulat.
[5] AFHCO submits
that the prosed transaction is part of its larger intention to
acquire the entire AFHCO property portfolio. The
Morulat platform is
an attractive Johannesburg CBD residential portfolio offering scale,
quality and diversity. Morulat on the
other hand submits that the
proposed transaction provides its shareholders with an opportunity to
realise their investment in the
Morulat portfolio.
Competition
assessment
[6] The Commission
submitted that the proposed transaction gives rise to a horizontal
overlap in the market for the provision of
residential property and
retail space as both merging parties own residential properties with
retail space.
[7]
In relation to the overlap in the provision of rental space in
convenience centres within a six kilometre ("km”)
radius
of the Johannesburg CBD, the Commission found that the merged entity
will have a market share of less than 17%. During the
hearing, Mr
Plit, who is a Director of the acquiring firm, submitted that the
nature of the AFHCO portfolio is in fact affordable
housing and that
the retail component is incidental to the residential component. As
such, AFHCO has almost nothing in the commercial
market.
2
[8] In relation to
the overlap in the provision of residential properties, the
Commission could not find readily available information
to determine
the market shares of firms that provide residential space in the
identified market. However the Commission’s
analysis revealed
that there are approximately thirty competitors within the
Johannesburg CBD that will continue to constrain the
merged entity.
The Commission thus came to the conclusion that the proposed
transaction is unlikely to substantially prevent or
lessen
competition in the identified markets.
[9]
In addition to this, Mr Plit re-assured us during the hearing that
the small operators who rent out retail space have a wide
choice of
landlords as the acquiring firm is almost irrelevant as there are
more than forty buildings that small operators have
as choice,
post-merger.
3
Public interest
[10] The Commission
submitted that the proposed transaction results in no public interest
concerns.
CONCLUSION
[11] We agree with
the Commission that the proposed transaction is unlikely to
substantially prevent or lessen competition and thus
approve the
transaction without conditions.
14
January 2015
DATE
Mr
Norman Manoim
Mr Anton Roskam
and Ms Yasmin Carrim concurring.
Tribunal Researcher:
Caroline Sserufusa
For the merging
parties: Desmond Rudman of Webber Wentzel
For the
Commission:Dineo Mashego
1
See
SA Retail Properties (Pty) Ltd and AFHCO Holdings, Case no: 018762.
2
See
page 5 of the Transcript of hearing.
3
See page 9 of the Transcript of hearing.