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[2015] ZACT 125
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Imbali Props 21 Proprietary Limited v Dimopoint Proprietary Limited (LM021May15) [2015] ZACT 125 (7 September 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM021May15
In
the matter between:
lmbali
Props
21
Proprietary
Limited
Primary Acquiring Firm
and
Dimopoint
Proprietary
Limited
Primary Target Firm
Panel
: Ms Yasmin Carrim (Presiding Member)
: Ms Medi Mokuena
(Tribunal Member)
: Prof lmraan IValodia
(Tribunal Member)
Heard
on
: 12 August 2015
Order
Issued on
: 12 August 2015
Reasons
Issued on
: 7 September
2015
Reasons
for Decision
Approval
[1]
On 12 August 2015, the Competition Tribunal ("Tribunal"}
unconditionally approved the merger between lmbali Props
21
Proprietary Limited ("lmbali") and Dimopoint Proprietary
Limited ("Dimopoint").
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm lmbali is jointly controlled by Teez Away
Trading (Pty) Ltd and Redbill Holdings (Ply) Ltd.
[4]
lmbali forms part of the Collins Group ("the Aquiring Group")
of companies which is active in the business of investing
and
developing immoveable property in South Africa for the purposes of
earning rental income.
Primary
target firm
[5]
The primary target firm, Dimopoint is a firm incorporated for
purposes of the proposed transaction. Dimopoint is a wholly owned
subsidiary of Aveng Africa (Pty) Ltd ("Aveng Africa") which
in turn is controlled by Aveng Limited ("Aveng").
Aveng
controls a number of firms but relevant to this transaction is
Aveng's control of Grinaker-LTA Properties (Pty) Ltd ("Grinaker-
LTA Properties").
[6]
Upon implementation of the transaction Aveng Africa and Grinaker- LTA
Properties will transfer 35 properties ("the Target
Properties"), consisting of light and heavy industrial property
space, to Dimopoint.
Proposed
transaction and rationale
[7]
The proposed transaction involved the establishment of a joint
venture between Aveng Africa, Grinaker- LTA Properties and lmbali.
In
order to give effect to the joint venture Aveng Africa and Grinaker-
LTA Properties will transfer properties to Dimopoint in
return for
shares in the company. lmbali will subscribe to a certain percentage
of the issued share capital. These agreements will
result in lmbali,
Aveng Africa and Grinaker- LTA Properties jointly controlling
Dimopoint.
[8]
lmbali submits that the proposed transaction will enable it to expand
and diversify its property portfolio in the industrial
property
segment. For Aveng, the proposed transaction is in line with its
strategy to take advantage of growth opportunities.
Impact
on competition
Horizontal
overlap
[9]
The Competition Commission ("the Commission") identified a
horizontal overlap in the activities of the merging parties
in the
provision of rentable industrial properties as the Acquiring Group
owns industrial properties and the Target Properties
comprises rental
industrial properties. The Commission assessed the competitive
effects of the proposed transaction in the markets
for rental space
in light industrial properties and heavy industrial properties
separately. The Commission utilized municipality
zoned industrial
areas, to identify the relevant geographic markets.
[10]
For the provision of heavy industrial properties the Commission found
no geographical overlap as the merging parties' heavy
industrial
properties do not fall under the same node. The proposed transaction
is unlikely to substantially prevent or lesson
competition in the
provision of heavy industrial properties.
[11]
In the analysis of light industrial properties, the Commission
identified overlaps in Gauteng and Kwazulu-natal. In Gauteng
the
Commission identified an overlap in the Germiston Node. For
Kwazulu-Natal the Commission identified overlaps in
lsipingo/Propecton/Mobeni,
Pinetown/New Germany and Richards Bay
Nodes.
[12]
The Commission in its analysis found that market shares of the
acquiring group post merger per node of between 0.5% and
6% as
well as the market share accretion per node was low. The Commission
also found that the presence of other competitors within
each node
presented a constraint on the merging parties. Based on these factors
the Commission is of the view that the proposed
transaction would not
result in a substantial lessening of competition.
[13]
The Tribunal finds that the low market shares, minimal accretion and
the presence of competitors within the nodes would unlikely
result in
a substantial lessening of competition.
Concerns
raised by tenants of the merging parties
[14]
A tenant of lmbali submitted that the proposed transaction would
incentivise lmbali to conclude rental agreements in favour
of Aveng
subsidiaries to the detriment of the competitors of those
subsidiaries.
[15]
The Commission considered whether lmbali had the incentive to
terminate lease agreements with competitors of Aveng in order
to
favour Aveng and found that no incentive existed as the proposed
transaction did not result in a change of control over properties
controlled by lmbali. Accordingly Aveng had no ability to influence
the rental terms. The Commission is therefore of the view that
the
concern raised is not merger specific.
[16]
The Tribunal in order to evaluate whether the submissions had any
basis questioned the merging parties on the procedure of
setting
rentals and terms and conditions. The Tribunal was satisfied that the
procedure would remain the same post-merger and therefore
concluded
that the concern was not merger specific.
Public
interest
[17]
The
merging
parties
confirmed
that the
proposed
transaction
will
not result
in an
adverse
impact on
employment.
[1]
The
proposed
transaction
further
raises
no other
public
interest
concerns.
Conclusion
[18]
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 transactions. Accordingly, we approve the
proposed
transaction
07
September 2015
DATE
________________________
Ms
Yasmin Carrim
Ms
Medi Mokuena and
Prof lmraan
I Valodia
concurring
Tribunal
Researcher:
Aneesa Ravat
For
the merging parties: Vani
Chetty of Baker & McKenzie
For
the Commission:
Prishani Maheeph, Seema Nunkoo and Xolela
Nokele
[1]
Inter
alia
merger
record page 19.