competition tribunal , .. , .. ,,, ..
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM023Apr17
In the matter between
lndluplace Properties Limited Primary Acquiring Firm
And
Diluculo Properties Proprietary Limited Primary Target Firm
Panel : Mr AW Wessels (Presiding Member)
: Ms M Mazwai (Tribunal Member)
: Prof. I Valodia (Tribunal Member)
Heard on : 14 June 2017
Order Issued on : 14 June 2017
Reasons Issued on : 26 June 2017
REASONS FOR DECISION
APPROVAL
[1] On 14 June 2017, the Competition Tribunal ("Tribunal") unconditionally
approved the large merger between lndluplace Properties Limited ("lndluplace
Properties") and Diluculo Properties Proprietary Limited ("Diluculo
Properties"), herein collectively referred to as the merging parties.
[2] The reasons for the approval follow.
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PARTIES TO THE PROPOSED TRANSACTION
Primary Acquiring Firm
[3] The primary acquiring firm is lndluplace Properties, a company incorporated
in accordance with the laws of the Republic of South Africa. lndluplace
Properties is controlled by Arrowhead Properties Limited. lndluplace
Properties controls a number of firms.
[4] lndluplace Properties is a property investment company which holds a large
residential property portfolio. It invests in residential properties with a focus on
affordable housing generally in large urban centres.
Primary Target Firm
[5] The primary target firm is Diluculo Properties, a company incorporated in
accordance with the laws of the Republic of South Africa. Pre-merger Diluculo
Properties is a wholly owned subsidiary of Diluculo Investments Proprietary
Limited {"Diluculo Investments"), which is in turn wholly owned by Barclays
Africa Group Limited. Diluculo Properties does not control any firm.
[6] Diluculo Properties invests in income producing residential properties. It owns
eight residential property letting enterprises in the Free State and in Gauteng.
PROPOSED TRANSACTION AND RATIONALE
[7] lndluplace Properties intends to acquire the entire issued share capital of
Diluculo Properties from Diluculo Investments. Post-merger Jndluplace
Properties will therefore exercise sole control over Diluculo Properties.
[8] According to lndluplace Properties, Diluculo Properties' property portfolio
comprises yield enhancing properties and complements its own property
portfolio.
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[9] Diluculo Investments and its controllers no longer view Diluculo Properties as
a core asset and thus they have resolved to sell it.
COMPETITION ANALYSIS
[1 O] The Competition Commission ("Commission") considered the activities of the
merging parties and found that the proposed transaction presents a horizontal
overlap since both the merging parties are active in the market for the
provision of rentable space in affordable housing property. From a geographic
market perspective, the Commission assessed the properties of the merging
parties in the Johannesburg CBD and surrounding nodes, Pretoria CBD and
surrounding nodes, Centurion and Region A, Ekurhuleni.
[11] For the purposes of the market concentration assessment, the Commission
relied on the market share estimates of the merging parties since there are
limited available data. The Commission also contacted competitors of the
merging parties to ascertain their views on the size of the market(s) and the
competitive climate.
[12] The Tribunal questioned the Commission and the merging parties regarding
the scope of the geographic market and the estimation of market shares. The
merging parties indicated that they used a geographic radius of approximately
eight kilometres to estimate their combined market share in each affected
geographic area.1 Based on this, the merging parties have a combined market
share of less than 10% in the market for the provision of rentable space in
affordable housing property in each affected geographic area.
[13] We take no view in this case on the exact scope of the relevant geographic
market and note that lndluplace Properties is acquiring only a single property
from Dilucuto Properties in each of the following areas: Pretoria CBD,
Centurion, Kempton Park, Germiston, Pretoria West and Bloemfontein; and is
acquiring two properties, Jozi House and Frederick House, in the
Johannesburg CBD. There appears to be a small market share increment in
1 Transcript, pages 3 to 5;
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each market as a result of the proposed transaction and, furthermore,
sufficient alternative rentable affordable housing property in each affected
geographic area post-merger.
[14] We concur with the Commission's ultimate conclusion that the proposed
transaction is unlikely to substantially prevent or lessen competition in any
relevant market.
PUBLIC INTEREST
[15] The merging parties confirmed that the proposed transaction will have no
adverse effect on employment. In particular, there will be no retrenchments or
job losses as a result of the proposed transaction.2
[16] Furthermore, the proposed transaction raises no other public interest
concerns.
CONCLUSION
[17] 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 as a result of the proposed transaction.
Accordingly, we approve the proposed transaction unconditionally.
26 June 2017
MrAWW~~els Date
Ms M Mazwai and Prof. I Valodia concurring
Tribunal Researcher
For the merging parties
For the Commission
2 Merger Record , pages 9 and 82.
: Mr Ndumiso Ndlovu
: Ms Vani Chetty of Baker McKenzie Attorneys
: Ms Zanele Hadebe
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