competltion trlbunal
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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM111Sep16
In the matter between:
LIBERTY TWO DEGREES Primary Acquiring Firm
and
LIBERTY GROUP LIMITED IN RESPECT OF
THE UNDIVIDED SHARES IN CERTAIN PROPERTIES Primary Target Firm
Panel
Heard on
Order Issued on
Reasons Issued on
Approval
: Norman Manoim (Presiding Member)
: Mondo Mazwai (Tribunal Member)
: Medi Mokuena (Tribunal Member)
: 23 November 2016
: 23 November 2016
: 09 December 2016
Reasons for Decision
[1] On 23 November 2016, the Competition Tribunal ("Tribunal") approved the large
merger between Liberty Two Degrees and Liberty Group Limited in respect of the
undivided shares in certain properties.
[2] The reasons for approving the proposed transaction follow.
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Parties to proposed transaction
Primary acquiring firm
[3) The primary acquiring firm is Liberty Two Degrees, a newly formed real estate
investment trust established in terms of section 47 of the Collective Investment
Schemes Control Act 45 of 2002 ("Collective Investment Schemes Act"). Liberty Two
Degrees will be listed in the REIT's sector on the Johannesburg Stock Exchange
(" JSE"). FirstRand Bank Limited ("First Rand") has been appointed as a trustee of
Liberty Two Degrees in terms of the Collective Investment Schemes Act1•
[4] Liberty Two Degrees is controlled by STANLIB REIT Fund Managers (Pty) Ltd RF
("STANLIB REIT"), a newly formed company that is wholly owned by Liberty Group
Limited ("LGL").
[5] Liberty Two Degrees has been established for the purposes of the proposed
transaction and does not have any activities. Liberty Two Degrees will conduct its
business through the Target Business.
Primary target firm
[6] The primary target firm is Liberty Group Limited in respect of retail properties that will
be transferred to Liberty Two Degrees. The retail properties to be transferred are
collectively referred to as the target business.
[7] The target business currently forms part of LGL's property portfolio, which is primarily
held for the benefit of LGL's existing policyholders. The target business comprises
super regional shopping centres, regional shopping centres, a community shopping
centre, rentable office space, commercial developments, hotel space, a gymnasium
and residential rental space located in the Free State, Gauteng and KwaZulu Natal
provinces.
Proposed transaction and rationale
1 The trustee has a fiduciary duty to require STANLIB REIT to report and obtain written consent from
FirstRand in certain instances including: making investments, borrowing money acquiring property or
services from a related party, as well as issuing , consolidating or sub-dividing the participatory units.
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[8] In terms of the proposed transaction, Liberty Two Degrees intends to acquire
approximately 22% of the undivided share currently held by LGL in the target business.
Upon completion of the proposed transaction, Liberty Two Degrees will directly control
the Target Business by virtue of the rights it will hold. However, there is no change in
indirect control in respect of the target business as Liberty Two Degrees is also under
the ultimate control of LGL.
[9] The merging parties submit that the proposed transaction is an internal restructuring
whereby LGL will ultimately own the Target Business through its newly established
subsidiary, Liberty two degrees post-merger. According to the merging parties, the
target business is pre-merger under the control of LGL, whilst Liberty Two Degrees will
directly control the target business post-merger.
[1 O] The merging parties submit that the listing of Liberty Two Degrees will augment the
value proposition to LGL's existing policyholders and enable greater opportunities for
enhancing the returns profile of premier properties. The listing will also support
expansion of and enhancements to LGL's existing property assets and broaden their
accessibility to a wider investment community.
Impact on competition
[11] The Commission considered the activities of the merging parties' and found that there
is a horizontal overlap in so far as LGL controls the target business. Post-merger, the
target business will still be ultimately controlled by LGL. Therefore there is no change
in the structure of the market. In addition, the Commission notes that there will be no
accretion in market shares in any market.
[12) In light of the above, the Commission was of the view that the proposed transaction is
unlikely to substantially prevent or lessen competition.
[13) We concur with the Commission's conclusion that the proposed transaction is unlikely
to substantially prevent or lessen competition in any relevant market.
Public interest
to substantially prevent or lessen competition in any relevant market.
Public interest
(14) The merging parties submit that neither Liberty two Degrees nor the target business
has employees. In particular, the proposed transaction will not result in any
retrenchments or job losses as the target business does not have any employees and
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the implementation of the proposed transaction will not bring about any duplication in
employment positions.
[15) In its assessment, the Commission found that some employees of LGL will be
transferred to STANLIB REIT, a newly created company which will be appointed to act
as an asset manager of Liberty Two Degrees. In this regard, the merging parties
confirmed that 10 employees will be transferred from LGL to STANLIB REIT in terms
of section 197 of the Labour Relations Act.
[16} The Commission also found that JHI Retail Division ("JHL Retail")2 is currently
responsible for the day to day management of Liberty's existing property portfolio and
has been appointed to render property management services for 1 O years which
expires in 2025. In this regard, the merging parties confirmed that STANLIB REIT will
continue to make use of the JHl Retail services in respect of the properties that will be
transferred to Liberty Two Degrees.
[17) Based on the above, the Commission was of the view that the proposed transaction is
unlikely to have a negative effect on employment.
[18} The proposed transaction further did not raise any other public interest concerns.
Conclusion
[19) 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 other
public interest issues arise from the proposed transaction. Accordingly, we approve
the proposed transaction unconditionally.
Mr
Ms Mondo Mazwai and Ms Medi Mokuena concurring
Tribunal Researcher:
For the merging parties:
Karissa Moothoo Padayachie
Webber Wentzel
09 December 2016
DATE
For the Commission: Maanda Lambani and Xolela Nokele
2 A joint venture formed in 2015 between LGL and JHI Properties (Pty) ltd
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