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[2018] ZACT 34
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Dipula Income Fund Limited v Bajascape (Pty) Ltd (LM292Feb18) [2018] ZACT 34 (27 March 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM292Feb18
In
the matter between
Dipula
Income Fund
Limited
Primary Acquiring Firm
And
Bajascape
(Pty) Ltd
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
:
Medi Mokuena (Tribunal Member)
:
Fiona Tregenna (Tribunal Member)
Heard
on
: 14 March 2018
Order
Issued on
: 14 March 2018
Reasons
Issued on
: 27 March 2018
REASONS
FOR DECISION
Approval
[1]
On
14 March 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction in terms of
which
Dipula Income Fund Limited ("Dipula") is acquiring control
over Bajascape (Pty) Ltd ("Bajascape").
[2]
The
reasons for the approval of the proposed transaction follow.
Parties to the transaction
Primary
Acquiring Firm
Dipula
is a REIT
[1]
listed on the JSE. Dipula is not controlled directly and indirectly
by any firm. Dipula directly and indirectly controls a number
of
firms
inter alia,
Mergence Africa
Property Investment Trust and Dipula Property Investment Trust.
Dipula and its subsidiaries will be referred to
as the "acquiring
group". The acquiring group owns a diversified portfolio of
retail, industrial and office properties.
The portfolio is currently
weighted towards retail properties and to a lesser extent, office and
industrial properties.
Primary Target Firm
[3]
Bajascape
is a newly established entity which is wholly-owned by the trustees
of the REC Group Property Trust
("REC
Trust").
The trustees are
Bradley Ivan Kark, David Soloman Brouze and Russel Hoole. Bajascape
does not directly or indirectly control any
firm, nor does REC Trust.
[4]
Bajascape
is invested in 23 immovable properties and letting enterprises. The
properties consist of a single office property in
Gauteng, and 22
industrial properties in Gauteng, Eastern Cape and Mpumalanga amongst
other provinces. Of relevance to the proposed
transaction is
Bajascape's office property in Gauteng (Sandton), and its industrial
properties in Gauteng (Alberton) and Eastern
Cape (Port Elizabeth).
Proposed transaction and
rationale
[5]
It
is intended that the proposed transaction be done in two steps. Prior
implementation, REC Trust will dilute its investment in
the
abovementioned 23 properties by disposing the properties to
Bajascape.
[2]
Dipula will then acquire 50.01% of the issued shares of Bajascape.
Upon implementation of the proposed transaction, the abovementioned
properties will be indirectly controlled by Dipula through its
interest in Bajascape.
Relevant market and impact on
competition
[6]
The
Competition Commission ("Commission") found a horizontal
overlap in the product market for the provision of rentable
grade A
office space and light industrial properties. The horizontal overlap
arises as a result of the merging parties owning grade
A office space
in Sandton (lllovo) and industrial properties in Alberton and Port
Elizabeth.
[7]
However
in this market the Commission found that the merging parties'
combined post-merger market share in the provision of rentable
grade
A office space in lllovo is less than 1%. The Commission further
found that there are other market participants like Cradock
Heights
and Mall Offices that will exercise competitive constraints against
the merged entity. The merging parties' competition
assessment
encompassed both the Hyde Park node and lllovo node as a single
market, and they came out with a slightly different
market share than
the Commission's. However, the post-merger market shares on this
scenario were negligible and raised no competition
concerns.
[8]
The
Commission found that the merging parties' combined post-merger
market share in the provision of rentable industrial property
would
be less than 7% (with less than 3% accretion) in Alberton, and less
than 15% (with Jess than 4% accretion) in Port Elizabeth.
The
Commission also found that there are other market participants like
Alrode Multipark (Alberton) and Warehouse Neave (PE) that
will
exercise competitive constraints against the merged entity.
[9]
Due
to the low market share accretions brought by the merger in the
affected markets, the Commission concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition in any market. We found no reason to disagree with the
Commission.
Public interest
[10] The
merging parties confirmed that the proposed transaction will not have
any adverse effects on employment.
[3]
The proposed transaction raises no other public interest concerns.
Conclusion
[11] In
light of the above, we concluded 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 approved the proposed
transaction unconditionally.
Ms
Yasmin Carrim
Mrs
Medi Mokuena and Prof. Fiona Tregenna concurring.
27 March 2018
Tribunal
Case Manager : Kgothatso Kgobe
For
the Merging Parties : S Meyer of Cliffe
Dekker Hofmyer
For the Commission
: R Ncheche
[1]
A REIT Is a RealEstate Investment Trust.
[2]
Merger Record, page 49.
[3]
Commission's report, page 16 and page 84 of the Merger Record.