competition trlbunal
,1111•1/; 111frh.-
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM015Apr17
In the matter between
Propertuity Development (Pty) Ltd Primary Acquiring Firm
And
Redefine Properties Ltd in respect of Jewel City Primary Target Firm
Panel
Heard on
Order Issued on
: Mr Norman Manoim (Presiding Member)
: Mr Enver Daniels (Tribunal Member)
: Prof. lmraan Valodia (Tribunal Member)
: 31 May 2017
: 31 May 2017
Reasons Issued on : 22 June 2017
REASONS FOR DECISION
Approval
[1] On 31 May 2017, the Competition Tribunal ("the Tribunal") unconditionally
approved the large merger between Propertuity Development (Pty) Ltd
("Propertuity Development") and Redefine Properties Ltd ("Redefine") in
respect of Jewel City, herein referred to as the merging parties.
[2] The reasons are as follows.
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Parties to the transaction
Primary Acquiring Firm
[3] Propertuity Development is a property investment company that primarily
engages in property development and holds a diverse portfolio of commercial,
office, residential and retail properties throughout South Africa. It is jointly
controlled by RMH Property Holdings (Pty) Ltd, JSL Investments (Pty) Ltd and
Roho Investments 1 (Pty) Ltd. In turn, Propertuity Development controls a
number of firms which include Main Street Life Trust, Revelation House Trust
and Propertuity Management (Pty) Ltd. Propertuity Development's controllers
and subsidiaries shall collectively be referred to as the Acquiring group.
[4] Of relevance to the proposed transaction is the Acquiring group's Grade A and
B office properties within the Gauteng Province.
Primary Target Firm
[5] The Jewel City property ("the Target property") is located within the central
business district (CBD) of Johannesburg, and is wholly owned by Redefine.
[6] The Target property is defined as a Grade B office property.
Proposed transaction and rationale
[7] The proposed transaction entails the sale of the Target property as an asset.
[8] The sale is subject to a delayed transfer condition. At the hearing Mr Ricky
Luntz, the Managing Director of Propertuity Development, explained that until
the Target property is transferred to the Acquiring group, which is likely to be in
September 2018, Redefine will remain in control of the Target property and will
retain the income derived from the tenants in place. Once the property is
registered in the Deeds Office, the Acquiring group will control of the Target
property without any restrictions of the sale agreement. In essence, the
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proposed transaction shall be effectively implemented once the delayed
transfer condition is satisfied.
[9] The Acquiring group expresses interest in the Target property and views it as
an attractive investment from which it can derive income. Currently, Redefine
is pursuing a strategy of investing in core-asset properties in certain areas. It is
of the view that the Target property no longer fits into its investment strategy
and therefore has decided to sell the Target property to the Acquiring group.
Relevant market and impact on competition
[1 O] The Commission considered the activities of the merging parties and found that
the proposed transaction presents a horizontal overlap as the merging parties
provide rentable Grade B office space in the Johannesburg CBD node (the
relevant market). At the conclusion of its investigation, the Commission found
that post-merger, the merged entity will have a minor market share of 5.5% with
an accretion of 4.3% in the relevant market. Furthermore, the merged entity will
still face competition from other players such as Delta Property Fund.
[11] In view of the minor market share accretion in the relevant market, the
Commission concluded that the proposed transaction is unlikely to substantially
lessen or prevent competition in the relevant market. We agree with the
Commission's findings although had the concentration been higher it might
have been worth investigating whether the Target Property could be
differentiated from other Grade B properties. At the hearing we were informed
that rentals at the Target Property were higher than those of other Grade B
properties because the building required greater security given its tenants were
in the jewellery business. On the present facts however this is not an issue we
need to determine.
Public interest
[12] The merging parties submitted that the proposed transaction will have no effect
on employment as the Acquiring group nor the Target property have any
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employees. Given that the merging parties will operate as they did pre-merger,
the Commission is of the view that the proposed transaction will not have any
adverse effects on employment and does not raise any other public interest
concerns.
Conclusion
[13] 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.
22 June 2017
MrNo Date
Mr Enve Daniels and Prof. lmraan Valodia concurring
Tribunal Researcher
For the merging parties
For the Commission
:Mr Ndumiso Ndlovu
:Ms Vani Chetty of Baker McKenzie
:Ms Zintle Siyo
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