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[2015] ZACT 71
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Housing Impact Fund South Africa v Stay at Southpoint Properties Proprietary Limited (LM148Oct15) [2015] ZACT 71 (7 December 2015)
COMPETITION
TRIBUNAL
OF SOUTH
AFRICA
Case
No: LM1480ct15
In
the matter between:
Housing
Impact
Fund South
Africa
Primary Acquiring Firm
and
Stay
at Southpoint
Properties
Proprietary
Limited
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: lmraan Valodia
(Tribunal Member)
: Fiona Tregenna
{Tribunal Member)
Heard
on :
2 December 2015
Order
Issued on
: 2 December 2015
Reasons
Issued on :
7 December 2015
Reasons
for Decision
Approval
[1]
On 2 December 2015, the Competition Tribunal ("Tribunal")
unconditionally approved the merger between Housing Impact
Fund South
Africa ("HIFSA") and Stay at Southpoint Properties
Proprietary Limited ("SASP").
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm HIFSA is a trust registered in terms of
the laws of South Africa. Participants in the Trust include;
Old
Mutual Life Assurance Company (South Africa) Limited, Development
Bank of Southern Africa Limited, Government Employees Pension
Fund
represented by the Public Investment Corporation Limited and Eskom
Pension and Provident Fund. The fund manager of HIFSA is
Old Mutual
Investments Proprietary Limited which is tasked with, amongst others,
the day to day management of HIFSA. In South Africa
HIFSA is
ultimately controlled by Old Mutual Group Holdings (South Africa)
Proprietary Limited ("OMSA").
[4]
HIFSA is a "Development Impact Fund" involved in the
finance of development projects for the construction of homes
in
urban and underdeveloped areas in South Africa. One of its
subsidiaries, Rand Lease Securitization Proprietary Limited is also
involved in property development for low to middle income earners.
OMSA is an investment holding company in respect of a variety
of
businesses including asset management, life insurance, banking,
investment products and services and short term insurance.
Primary
target
firm
[5]
The primary target firm, SASP is a private company which is
controlled by South Point Management Services Proprietary Limited
("South Point Management Services"). Prior to the proposed
transaction HIFSA owned a non-controlling interest in SASP
through
its 15% shareholding of ordinary issued share capital.
[6]
SASP is a property ownership business whose primary focus is student
accommodation. Additionally, SASP owns a single office
building which
it lets out to commercial tenants.
[7]
The
proposed
transaction
involves
a
share
restructuring
of
the
target
firm
which would
result
in
HIFSA
acquiring
50%
of
the
voting
rights
and
35%
of
the
ordinary
issued
share
capital of
SASP.
[1]
As
a
result
of the
proposed
transaction
HIFSA
and South
Point Management Services will exercise joint control over SASP.
[8]
The merging parties submitted that the proposed transaction was
essentially a debt restructuring arrangement.
Impact
on competition
[9]
The Competition Commission ("Commission") in its
investigation found that no horizontal overlap exists in respect
to
the provision of student accommodation as the Acquiring Group does
not own any student accommodation. The Commission found a
horizontal
overlap with respect to the provision of Grace C office property as
the merging parties both own office properties.
In their assessment
the Commission found that the Acquiring Groups Grade C office
property is currently mothballed and not operational
in the market.
Considering this evidence the Commission was of the view that it was
unnecessary to investigate further as they
submitted that the grade
of the office property may change once it is redeveloped. The
Commission concluded that the proposed transaction
is unlikely to
substantially prevent or lessen competition in any market.
[10]
Although the Tribunal was interested to see further analysis of the
Grade C office space by way of a comparison of its hypothetical
operation against the Target Firms existing office property, the
Tribunal is comforted by the fact that the primary business of
the
target firm is student accommodation with office accommodation
accounting for less than 10% of its sales. Additionally the
Acquiring
Firm's Grade C office property would not be redeveloped or restored
unless a tenant was available and at the time of
the hearing no such
tenant existed. Based on the facts presented to us the Tribunal is
also of the view that no overlap is present
in terms of the provision
of student accommodation. We therefore concur with the Commission's
competition assessment that the proposed
transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
[11]
The
merging
parties
confirmed
that
the
proposed
transaction
will
not
result
in
an
adverse
impact on employment and raises no other public interest concerns.
[2]
Conclusion
on[12]
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.
______________________
Ms
Yasmin Carrim
07
December 2015
DATE
Prof
lmraan Valodia and Prof Fiona Tregenna concurring
Tribunal
Researcher:
Aneesa Ravat
For
the merging parties: Susan
Meyer and Nazeera Mia of Cliffe Dekker Hofmeyr Inc
For
the Commission:
Thato Mkhize, Seema Nunkoo and
Xolela Nokele
[1]
HIFSA will post-transaction own 50% of the ordinary issued share
capital of SASP.
[2]
Inter
alia
merger
record page 11.