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[2018] ZACT 33
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Dipula Income Fund Limited v Luxiano Trading 181 (Pty) Ltd (LM291Feb18) [2018] ZACT 33 (28 March 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:LM291Feb18
In
the matter between
Dipula
Income Fund
Limited
Primary Acquiring Firm
And
Luxanio
Trading 181 (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 : 28 March 2018
REASONS
FOR DECISION
Approval
[1]
On
14 March 2018, the Competition Tribunal (''Tribunal")
unconditionally approved the proposed transaction involving Dipula
Income Fund Limited ("Dipula") and Luxanio Trading 181
(Pty) Ltd ("Luxanio"), hereinafter collectively referred
to
as the merging parties.
[2]
The
reasons for the approval of the proposed transaction follow.
Parties
to the transaction
Primary
Acquiring Firm
[3] Dipula
is a real estate investment trust ("REIT") listed on the
Johannesburg
Stock Exchange. Its shares are widely dispersed and as
such no single shareholder controls Dipula. Dipula controls nine
entities
in South Africa.
[4] Through
the firms under its control, Dipula owns a diversified portfolio of
retail,
office and industrial properties.
Primary
Target Firm
[5]
Luxanio
was established for purposes of the proposed transaction. It was
wholly owned by Setso Holdco (Pty) Ltd ("Setso"),
which is
ultimately controlled by the Patrice Motsepe Family Trust. In
addition to Luxanio, Setso wholly owns Setso Property Fund
(Pty) Ltd
("Setso Propco")
[6]
Luxanio
did not control any property. However, immediately prior to the
implementation of the merger and in terms of a restructuring
plan
with the aim of divesting property to Dipula, Luxanio acquired nine
immovable properties and letting enterprises controlled
by Setso
Propco, hereinafter referred to as the 'Target Properties'.
[7]
The
Target Properties comprise of retail properties in Gauteng, office
properties in Gauteng and Western Cape and a property utilised
as a
motor dealership in Gauteng.
Proposed
transaction
[8]
In terms of the proposed transaction, Dipula would acquire 100% of
the issued capital
in Luxanio. Post-merger, Dipula would own and
operate Luxanio.
Relevant
market and impact on competition
[9]
The Competition Commission ("Commission") found a
horizontal overlap between
the activities of the merging parties in
the following markets: (i) the market for the provision of
convenience centres within
a 10km radius from the merging parties'
properties in the Sandton and Environs node; (ii) the market for the
provision of convenience
centres within a 10km radius from the
merging parties' properties in the Johannesburg CBD node; and (iii)
the market for the provision
of rentable Grade A office properties in
the Hyde Park node.
[10] Data on
various property nodes throughout the country are published by the
South African Property
Owners Association ("SAPOA").
Relying on this source of information and on the distance between the
properties, the Commission
found that the merging parties would have
a combined post-merger market shares of less than 5%, 6% and 1% in
each respective relevant
market.
[11]
The Commission stated that the market
shares of the merged entity were relatively low in each relevant
market. Furthermore, in each
relevant market the merged entity would
continue to face competition from a number of well established
retail centres and
office properties.
[12]
The Commission thus concluded that the
proposed transaction was unlikely to substantially prevent or lessen
competition within the
relevant markets.
[13]
At the hearing, the merging parties'
representatives raised concerns about the geographical market
delineation for the Grade A office
properties. Only Luxanio has
office property in Hyde Park, Dipula does not own any property in
that area. Hence, in their view
it was incorrect to arrive at the
conclusion that there was an overlap in that node.
[1]
[14]
The Tribunal noted this fact and
concluded that on either approach the transaction was unlikely to
substantially prevent or lessen
competition.
Public
interest
[15]
The
merging parties confirmed that the proposed transaction would not
result in any retrenchments or job losses.
[2]
[16]
The
proposed transaction raised no other public interest concerns.
Conclusion
[17]
In
light of the above, we concluded that the proposed transaction was
unlikely to prevent or lessen competition in any relevant
market. In
addition, no other public interest concerns arose from the proposed
transaction. Accordingly, we approved the proposed
transaction
unconditionally.
Ms
Yasmin Carrim
Mrs Medi Mokuena and
Fiona Tregenna concurring.
28 March 2018
Tribunal
Researcher:
Hlumelo Vazi
For
the Merging Parties:
N Mia of Cliffe Dekker
Hofmeyr Inc.
For
the Commission:
R Ncheche
[1]
Transcript,
page
3.
[2]
Merger Record, pages 8 and 85.