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[2018] ZACT 44
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SA Retail Properties (Pty) Ltd v Silver Crown Trading 27 (Pty) Ltd, Storage Genie (Pty) Ltd and related parties in respect of six storage unit properties (LM2180ct17) [2018] ZACT 44; [2018] 1 CPLR 326 (CT) (23 March 2018)
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case
No: LM2180ct17
In
the matter between:
SA
Retail Properties (Pty)
Ltd
Primary Acquiring Firm
And
Silver Crown Trading 27 (Pty) Ltd,
Storage Genie (Pty) Ltd and
related
Primary Target Firms
parties
in respect of six storage unit properties
Panel
: Mr Andreas Wessels (Presiding Member)
: Mrs Medi Mokuena (Tribunal Member)
: Ms
Andiswa Ndoni (Tribunal Member)
Heard
on
: 1 March 2018
Order
Issued on : 1 March 2018
Reasons
Issued on : 23 March 2018
REASONS
FOR DECISION
APPROVAL
[1]
On
1 March 2018 the Competition Tribunal ('Tribunal") conditionally
approved the transaction involving SA Retail Properties
(Pty) Ltd
("SAR") and Silver Crown Trading 27 (Pty) Ltd ("Silver
Crown"), Storage Genie (Pty) Ltd ("Storage
Genie") and
related parties in respect of six storage unit properties.
[2]
The reasons for the conditional approval
of the proposed transaction follow.
PARTIES TO THE PROPOSED TRANSACTION
Primary
Acquiring Firm
[3]
The
primary acquiring firm is SAR. SAR is a wholly-owned subsidiary of SA
Corporate Real Estate Limited ("SACREL"), a
JSE listed real
estate investment trust. SACREL controls over 30 firms. SACREL and
its subsidiaries will be referred to as the
"acquiring group".
[4]
The
acquiring group owns commercial properties and various storage units
throughout South Africa.
Primary
Target Firms
[5]
The
primary target firms are Silver Crown, Storage Genie and related
parties in respect of six storage unit properties. Silver Crown
directly and indirectly controls Storage Genie, Vigasat (Pty) Ltd
("Vigasat"), SAC Storage (Pty) Ltd ("SAC Storage"),
Aztitone (Pty) Ltd ("Aztitone") and Lykoi (Pty} Ltd
("Lykoi"}.
[6]
Of
relevance to the competition assessment of the proposed transaction
is the six storage facilities directly and indirectly controlled
by
the abovementioned firms. These six storage facilities are located in
the following geographic areas: Atlas Road (Ekurhuleni);
Sebenza
(Ekurhuleni); Cresta (Randburg); Erand; Fairlands; and Milnerton. The
six storage facilities will be referred to as the
"target
properties".
[7]
In
addition, SAR will in terms of the proposed transaction have the
right to purchase future storage sites which may be developed
by
Storage Genie in terms of a "partnership" arrangement. The
merging parties however do not at this stage know where
these future
self-storage sites will be developed or their capacities.
PROPOSED
TRANSACTION AND RATIONALE
[8]
In
terms of a
Heads of Terms agreement,
the proposed transaction entails SAR
acquiring six storage facilities from Storage Genie and the
abovementioned related entities.
Furthermore,
SAR
will
have the right to purchase
storage units which may in future be developed by Storage Genie in
terms of a "partnership"
agreement.
[9]
SACREL
submitted that it wishes to diversify its property exposure and
expand its national footprint.
[10] The proposed
transaction will enable Storage Genie to dispose of its current
storage property portfolio
and focus on the development and
construction side of its business.
IMPACT
ON COMPETITION
[11]
The
Competition Commission ("Commission") found a horizontal
overlap between the activities of the merging parties in
the
provision of self-storage facilities.
[12]
The
facilities to be acquired at Erand, Milnerton and Fairlands consist
of vacant land with no tenants. For the existing storage
facilities
at Atlas Road (Ekurhuleni), Sebenza (Ekurhuleni) and Cresta
(Randburg) the Commission, from a geographic market delineation
perspective, considered an area with a 10 km radius around the target
storage facilities. On this basis a geographic overlap was
found in
relation only to the facilities situated at Cresta and Sebenza. We
discuss each of these areas below and then discuss
the abovementioned
future self-storage sites (see paragraphs 7 and 8 above).
Sebenza
[13]
For
the Sebenza storage facility the Commission found that the merged
entity will have a post-transaction market share of less than
20% in
the provision of self-storage facilities within a 10 km radius.
Competitors in this geographic area include Star-age (Giloolsy
and
Kempton Park) and Xtraspace (Edenvale and Kempton Park). The
Commission concluded that the proposed transaction is unlikely
to
substantially prevent or lessen competition in this relevant market.
We concur with this finding.
Cresta
[14]
For
the Cresta storage facility the Commission found that the merged
entity will have a post-transaction market share of approximately
34%
in the provision of self-storage facilities within a 10 km radius.
The Commission however found a substantial prevention or
lessening of
competition in this market unlikely because of the existence of
competitors such as Storage RSA, Star-age Constantia
Kloof and
Kwik-Storage Gordon Road within the 10 km radius. In addition, a
number of other competitors were identified within a
20 km radius of
the Cresta storage facility. Furthermore, the Commission stated that
a previous customer of the Cresta storage
facility indicated that it
was able to switch to a competing storage facility in close vicinity
to the Cresta facility.
[15]
The
Tribunal notes that, given the relatively high market share, it would
have expected the Commission to include more customers
of the Cresta
facility in its market investigation. The Commission was also not
able to explain a relatively high vacancy rate
at one of the
competitors of the merging parties in this area. Be that as it may,
we have no reason to believe that the proposed
transaction is likely
to substantially prevent or lessen competition in this relevant
market given the presence of the above identified
competitors.
Future
Storage Sites
[16]
The
Commission highlighted the uncertainty associated with the
abovementioned partnership agreement entered into between the merging
parties (see paragraphs 7 and 8 above). As noted above, SAR will have
a right to purchase future storage sites which may be developed
by
Storage Genie in terms of a "partnership" arrangement.
Given that the merging parties do not at this stage know where
these
future self-storage sites will be developed or what the size of each
facility will be, the Commission was unable to assess
the competitive
effects of this.
[17]
In
order to address this the Commission and the merging parties agreed
that the merging parties will notify all (intermediate and
large)
mergers which involve the acquisition by SAR of storage sites from
Storage Genie and its related parties, and that in the
case of a
small merger
[1]
,
the merging parties will write to the Commission to advise it of any
sale of a future storage site, in which event the Commission
may call
for a full merger notification in terms of the small merger
provisions of the
Competition Act, No 89 of 1998
, as amended ("the
Act"). This will apply for a period of 7 (seven) years envisaged
by the agreement between the merging
parties.
[18] Given the above
concern, we have conditionally approved the proposed transaction. The
imposed conditions
in essence require the following:
a.
The merging parties shall, for a period
of 7 (seven) years from the implementation date of the proposed
transaction, inform the
Commission in writing of any sale of a Future
Storage Site
[2]
between the merging parties, which involves the acquisition by SAR of
a Future Storage Site from Storage Genie and its related
parties,
that is defined as a small merger in terms of the Act, within 10
(ten) days of concluding any sale agreement in respect
of such small
merger. Upon receipt of such notice, the Commission may require the
merging parties to notify the small merger in
terms of the Act.
b.
Further, the merging parties shall, for
a period of 7 (seven) years from the implementation date of the
proposed transaction, notify
any merger of any sale of a Future
Storage Site between the merging parties, which involves the
acquisition by SAR of a Future
Storage Site from Storage Genie and
its related parties, that requires notification in terms of the Act.
[19] We are
satisfied that the above conditions remedy the Commission's concern
related to the notification
of transactions involving any Future
Storage Sites that the acquiring group may in future acquire from
Storage Genie.
PUBLIC INTEREST
[20]
The
merging parties confirmed that the proposed transaction will not
result in any adverse effects on employment.
[3]
[21]
The
proposed transaction does not raise any other public interest
concerns.
CONCLUSION
[22]
In
light of the above, we conclude that the proposed transaction is
unlikely to substantially prevent or lessen competition in any
relevant market relating to the identified existing storage sites. As
described above, a notification remedy has been imposed relating
to
any Future Storage Sites that the acquiring group may in future
acquire from Storage Genie. The imposed set of conditions is
attached
hereto marked as "Annexure A".
[23]
No
public interest issues arise from the proposed transaction.
23
March 2018
Mr
Andreas Wessels
Mrs
Medi Mokuena and Ms Andiswa Ndoni concurring
Tribunal Case Manager
: Kgothatso
Kgobe
For
the Merging Parties
: A Le Grange
of Cliffe Dekker Hofmeyr
For
the Commission
: N Myoli and T Masithulela
[1]
"Small merger" means a merger or proposed merger with a
value at or below the lower threshold established in terms
of
section 11(1)(a)
of the Act.
[2]
SAR will have a right to purchase self-storage sites which may be
developed in future by Storage Genie in terms of a "partnership"
arrangement ("Future Storage Sites").
[3]
Merger Record, pages 9 and 54.