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[2015] ZACT 25
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Growthpoint Properties Limited v Acucap Properties Limited (020420) [2015] ZACT 25 (23 March 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 020420
In the matter
between:
GROWTHPOINT
PROPERTIES
LIMITED
...........................................................
Primary
Acquiring Firm
And
ACUCAP
PROPERTIES
LIMITED
................................................................................
Primary
Target Firm
Panel: Mr A Wessels
(Presiding Member)
: Prof. I Valodia
(Tribunal Member)
: Ms M Mokuena
(Tribunal Member)
Heard on: 11 March
2015
Order Issued on : 11
March 2015
Reasons Issued on:
23 March 2015
Reasons for
Decision
Approval
[1] On 11 March
2015, the Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by Growthpoint
Properties
Limited (“Growthpoint”) of Acucap Properties Limited
(“Acucap”).
[2] The reasons for
approving the proposed transaction follow.
Parties to
proposed transaction
[3]
The primary acquiring firm is Growthpoint. No one firm controls
Growthpoint for competition law purposes. Growthpoint is listed
as a
Real Estate Investment Trust on the Johannesburg Securities Exchange
Limited. Growthpoint has a number of subsidiaries.
1
[4] Growthpoint is a
property investment holding company. Its property portfolio comprises
of rentable retail space, rentable office
space and rentable
industrial space. The majority of Growthpoint’s properties are
situated in Gauteng with the remainder
located in the Western Cape,
KwaZulu-Natal and the Eastern Cape.
[5]
The primary target firm is Acucap. The shares of Acucap are listed on
the Johannesburg Securities Exchange. Acucap directly
and indirectly
controls a number of firms.
2
[6] Acucap is a
property loan stock company. It invests in retail property situated
in major urban centres and retains the characteristic
of a
diversified fund through investments in quality office nodes and
industrial parks.
Proposed
transaction and rationale
[7] Growthpoint
intends to acquire all the ordinary shares in the issued share
capital in Acucap not already held by it. Post-merger
Acucap will
become a wholly-owned subsidiary of Growthpoint.
[8]
Growthpoint submitted that the proposed transaction presents
inter
alia
an
opportunity to increase the size of its property portfolio, increased
retail weighting of the fund and the take-on of an experienced
asset
management team.
[9]
Acucap submitted that the proposed transaction will provide
inter
alia
a
greater spread of assets and a more diversified sectoral spread.
Relevant markets
and impact on competition
[10] The Competition
Commission (“Commission”) identified product overlaps
between the merging parties’ activities
in the following areas:
(i) Grade A office
property in the Bedfordview/Bruma node;
(ii) Grade A office
property in the Bellville node;
(iii) Grade A office
property in the Bryanston/Epsom Downs node;
(iv) Grade A office
property in the lliovo node;
(v) Grade A office
property in the Menlyn/Faerie Glen/Ashlea Gardens node;
(vi) Grade A office
property in the Pinelands node;
(vii) Grade A office
property in the Rondebosch/Newlands node;
(viii)
Grade A
3
office property in the Sandton and Environs node;
(ix)
Grade A and P
4
office property in the Sandton and Environs node;
(x) Grade B office
property in the Green Acres node;
(xi)
rentable comparative centres within a 15 km radius of the Green Acres
Mall
5
;
(xii)
rentable value centres within a 10 km radius of the East Rand Value
Centre
6
;
(xiii)
Grade A
7
office property in the Cape Town CBD node;
(xiv)
Grade A and P
8
office property in the Cape Town CBD node; and
(xv) Grade A office
property in the Woodmead node.
[11] We take no view
in these reasons on whether Grade A and Grade P office property in
any of the above-mentioned nodes constitute
a single or separate
relevant product markets.
[12] The Commission
concluded that the merged entity’s post-merger market share
will be less than 30% in markets (i) to (xii)
above. The Commission
was of the view that competitors’ properties in these markets
will serve as credible alternatives to
the tenants of the merging
parties should the merging firms attempt to unilaterally increase
their prices to the detriment of their
tenants. The Commission
therefore concluded that the proposed merger is unlikely to
substantially prevent or lessen competition
in these markets. We
concur with the Commission's conclusion and do not deal with these
markets in any further detail.
[13]
In the markets for the provision of rentable (i) Grade A and (ii)
grade A and P office property in the Cape Town CBD node the
merged
entity will have postmerger market shares of [30-40]%. The Commission
was however of the view that the merged entity would
still be
unlikely to exercise power market in these markets given (i) the
presence of certain competitors in this node; (ii) several
new office
developments in this node that will likely increase the amount of
office space available for rental; and (iii) current
vacancy rates of
10% for Grade A office property in this node and 36.5% for Grade P
office property in this node.
9
The Commission concluded that these factors will sufficiently dilute
the merged entity’s market share and constrain the merged
entity in future.
[14]
The Tribunal questioned the merging parties regarding the
above-mentioned new property developments since the merging partie
s'
competitive report and the Commission’s report only contained
the names of the planned developments and the overall volume
(i.e.
the Gross Leasable Area (GLA)) of the planned space. The Tribunal was
specifically interested in the identities of the parties
responsible
for these developments, the grade(s) of office property being
developed and the likely future occupation dates of the
office space.
The Tribunal will require merging parties to submit full details in
future merger filings regarding new property
developments for the
Commission to investigate further where market shares in a relevant
market are significant.
[15]
Similarly, in the market(s) for (i) Grade A and (ii) Grade A and P
office property in the Woodmead node the merged entity will
have high
postmerger market shares of [40-50]%. The Commission was however of
the view that the merged entity would be unlikely
to exercise market
power in these markets given (i) the presence of the existing Grade A
offices owned by competitors such as Redefine,
Zen prop, Emira and
Tower Property Fund; (ii) a current vacancy rate in this node of 9.1
%;
10
and (iii) adjacent nodes within a 5 km radius from the Woodmead node.
These adjacent nodes include Waterfall, Sunninghill and Morningside.
The Commission indicated that in particular the new developments in
the Waterfall node will likely add more than 200 000 m2 of
rentable
office property to the area. Based on this the Commission concluded
that the proposed merger is unlikely to substantially
prevent or
lessen competition in these relevant markets.
[16] None of the
merging parties’ tenants contacted by the Commission raised any
competitive concerns arising from the proposed
transaction.
[17] We have no
reason to doubt the Commission’s conclusion on the competition
effects of the proposed merger with regards
to the latter relevant
markets.
Public interest
[18]
The merging parties confirmed that the proposed transaction will not
have any negative effect on employment in South Africa
and that no
retrenchments will result from the proposed transaction.
11
[19]
The proposed merger further raises no other public interest concerns.
Conclusion
[20] In light of the
above, we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition
in any relevant market.
In addition, no public interest issues arise from the proposed
transaction. Accordingly we approve the
proposed transaction
unconditionally.
23 March 2015
DATE
Mr AWessels
Prof. I Valodia
and Ms M Mokuena concurring
Tribunal Researcher:
Moleboheng Moleko
For the merging
parties: Johan Coetzee of Glyn Marais Inc
Vani Chetty of Baker
&McKenzie
For
the Commission: Seabelo Molefe
1
See
merger record, pages 12 to 14.
2
See merger record, pages 57 to 59
3
The
Commission left the product market delineation open with regards to
the property grade, i.e. whether or not Grade A and Grade
P office
property constitute a single or separate relevant product markets.
4
The
Commission left the product market delineation open with regards to
the property grade, i.e. whether or not Grade A and Grade
P office
property constitute a single or separate relevant product markets.
5
Acucap
currently owns this centre.
6
Acucap
currently owns this centre.
7
The Commission left the product market delineation open with regards
to the property grade, i.e. whether or not Grade A and Grade
P
office property constitute a single or separate relevant product
markets.
8
The Commission left the product market delineation open with regards
to the property grade, i.e. whether or not Grade A and Grade
P
office property constitute a single or separate relevant product
markets.
9
Source:
the South African Property Owners Association (SAPOA).
10
Source:
the South African Property Owners Association (SAPOA).
11
Merger
record, pages 6, 95 and 144.