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[2015] ZACT 5
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Vukile Property Fund Limited v Synergy Income Fund Limited (020040) [2015] ZACT 5 (16 January 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020040
In the matter
between:
VUKILE
PROPERTY FUND
LIMITED
...............................................................
Primary
Acquiring Firm
And
SYNERGY
INCOME FUND
LIMITED
........................................................................
Primary
Target Firm
Panel: Norman Manoim
(Presiding Member)
: Yasmin Carrim
(Tribunal Member)
: Mondo Mazwai
(Tribunal Member)
Heard on: 12
December 2014
Order Issued on: 12
December 2014
Reasons Issued on:
16 January 2015
Reasons for
Decision
Approval
[1] On 12 December
2014, The Competition Tribunal unconditionally approved the
acquisition of control by Vukile Property Fund Limited
(“Vukile”)
over Synergy Fund Limited (“Synergy”).
[2] The reasons for
approving the proposed transaction follow.
Parties to
transaction
Primary
acquiring firm
[3] The primary
acquiring firm is Vukile, a public company listed on the Johannesburg
Securities Exchange (“JSE”). Vukile
is not controlled by
any firm.
[4] Vukile is a
property investment fund with a property portfolio comprising of
retail and office property as well as vacant undeveloped
land.
Relevant for purposes of this transaction are 29 retail properties
within its portfolio classified as neighbourhood, community
and
regional centres located in the Gauteng, Limpopo, Mpumalanga, Free
State, Northern Cape, Kwazutu-Natal and Western Cape provinces.
Primary
target firm
[5]
The primary target firm is Synergy or its property portfolio in the
alternative.
1
Synergy is a public company listed on the JSE. Synergy is not
controlled by any firm.
[6] Synergy is a
property investment fund with a property portfolio comprising of
retail property classified as community and neighbourhood
centres
located in the Free State, Limpopo, Mpumalanga, North West and
Kwazuiu-Natal provinces.
Proposed
Transaction
[7] Vukile currently
holds 39% of the shares in Synergy, pursuant to the proposed
transaction; Vukile will be increasing its shareholding
in Synergy.
The terms of the transaction include, Vukile either exercising its
obligation to make a mandatory offer to acquire
the remaining shares
in Synergy, or in the alternative, exercising its right by making an
offer to acquire the property portfolio
of Synergy.
[8] These mandatory
offers will result in Vukile increasing its shareholding by having
sole control over Synergy, or in the alternative,
sole control over
the property portfolio of Synergy in terms of section 12(2) of the
Competition Act, Act No 89 of 1998 (the “Act”).
Regardless which option Vukile implements, being either the
acquisition of the shares and property portfolio, both will result
in
Vukile having control over the property portfolio of Synergy.
[9] The merging
parties submitted that they are unable to provide the exact number of
shares that Vukile will acquire in Synergy,
as the mandatory offer
was subject to unconditional approval from the South African
Competition Authorities. Thus the Commission
adopted a worst case
scenario and assed the proposed acquisition on the basis of sole
control being acquired.
Rationale
[10] Vukile has
submitted, as a rationale for the transaction, to increase its
exposure to retail property. Synergy has not submitted
its rationale
as Vukile has not, as yet, made its mandatory offer.
Relevant Market
and Impact on Competition
[11] The Commission
considered the activities of the merging parties in the provision of
rental space in convenience centres and
found that a geographic
overlap exists in Kwazulu-Natal, specifically within a 10km radius of
the KwaMashu Shopping Centre. The
Commission found that the merged
entity will have a post-merger market share of 16.35%, with an
accretion of 5.13%.
[12] Based on its
analysis, the Commission concluded that the proposed transaction is
unlikely to substantially prevent or lessen
competition in the market
for the provision of rental space in convenience centres within a
10km radius of KwaMashu Shopping Centre,
as the merged entity’s
post-merger market share remains low. This is a finding upon which we
incur.
Public Interest
Analysis
[13]
The Commission noted a potential public interest concern with respect
to an exclusivity clause contained in a Lease Agreement
at the
KwaMashu Shopping Centre concluded in favour of the Spar Group (Pty)
Ltd (“Spar”). This exclusivity clause was
deemed to raise
a potential public interest concern in terms of section 12A (3) (a)
and (c) of the Act. The Commission noted however,
that this concern
was addressed by it in a previous investigation performed when
Synergy initially acquired a 100% interest in
the KwaMashu Shopping
Centre in 2011.
2
[14] In this
respect, the Commission approved the transaction subject to the
condition that Synergy was required to negotiate with
Spar for the
removal of the exclusivity clause upon expiry of the lease agreement
in 2015. The obligations placed upon Synergy
in terms of the
aforementioned condition will be passed onto Vukile should it acquire
the KwaMashu Shopping Centre. Thus the Commission
found, given the
existence of this condition, that a further condition applicable to
this transaction is not necessary.
[15] The proposed
transaction raises no public interest concerns other than those
surrounding exclusivity as discussed above.
Conclusion
[16] In light of the
above we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition
in the identified
markets. Accordingly we approve the proposed transaction
unconditionally.
16 January 2015
DATE
Norman Manoim
Yasmin Carrim and
Mondo Mazwai concurring
Tribunal Researcher:
Derrick Bowles
For the merging
parties: Andries Le Grange - Cliffe Dekker Hofmeyr
For the Commission:
Xolela Nokele and Seema Nunkoo
1
See
details surrounding the transaction at paragraphs 7, 8 and 9 below.
2
Refer
to Commission case number 201 1Ju10147.