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[2018] ZACT 47
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Grindrod Property Private Equity (Pty) Ltd v Dunrose Investments 82 (Pty) Ltd (LM169Sep18) [2018] ZACT 47 (29 October 2018)
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case
No: LM169Sep18
In
the matter between
Grindrod
Property Private Equity (Pty)
Ltd
Primary
Acquiring Firm
And
Dunrose
Investments 82 (Pty)
Ltd
Primary Target
Firm
Panel
: Norman Manoim (Presiding Member)
:
Andiswa Ndoni
(Tribunal Member)
:
Halton Cheadle (Tribunal Member)
Heard
on
: 10 October 2018
Order
Issued on
: 10 October
2018
Reasons
Issued on
: 29 October 2018
REASONS
FOR DECISION
Approval
[1]
On
10 October 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction involving
Grindrod
Property Private Equity (Pty) Ltd ("GPPE") and Dunrose
Investments 82 (Pty) Ltd ("Dunrose"), hereinafter
collectively referred to as the merging parties.
[2]
The
reasons for approval of the proposed transaction follow.
Parties
to the transaction
Primary
Acquiring Firm
[3]
GPPE
is ultimately controlled by Grindrod Limited ("Grindrod"),
a company listed on the Johannesburg Stock Exchange. The
shares in
Grindrod are widely dispersed and as such no single shareholder
controls Grindrod. In addition to GPPE, Grindrod controls
numerous
firms. Grindrod and all its subsidiaries are hereinafter collectively
referred to as the 'Grindrod Group'.
[4]
The
Grindrod Group is active in the freight and logistics industry as
well as the financial services industry. Due to their activities,
the
group has split their operations into two divisions, the Grindrod
Freight Services Division ("Freight Division")
and the
Grindrod Financial Services Division ("Financial Division").
[5]
Of
relevance is the Financial Division which GPPE falls under. The
Financial Division has banking, private equity, asset management
and
exchange trade fund services. GPPE
is
a
private equity company which
invests in properties directly or indirectly through property owning
companies.
Primary
Target Firm
[6]
Dunrose
is a wholly-owned subsidiary of Griffin Holdings (Pty) Ltd ("Griffin
Holdings".) Griffin Holdings controls numerous
firms in South
Africa. Dunrose jointly controls Kingsgate Shopping Centre (Pty) Ltd
("Kingsgate"). Griffin Holdings and
Dunrose and all firms
directly and indirectly controlled by them are hereinafter
collectively referred to as the 'Griffin Group".
[7]
The
Griffin Group is active in the property sector. The Griffin Group has
an investment property portfolio comprised of industrial
and
commercial property. Dunrose owns one light industrial property
located in Anderbolt, Germiston.
Proposed
transaction
[8]
In
terms of the
Subscription Agreement,
GPPE will acquire 40% of the issued
share capital in Dunrose and will therefore exercise joint control
over Dunrose post-merger.
Impact
on competition
[9]
The
Competition Commission ("Commission") considered the
activities of the merging parties and identified a horizontal
overlap
in the product market for the provision of rentable light industrial
properties.
[10] The
Commission found no geographical overlap between the light industrial
properties owned by the merging
parties. The Commission found that
light industrial properties would be constrained by competing light
industrial properties within
a 10km radius. However, in this case,
the closest light industrial property owned by the Grindrod Group is
located approximately
20km away from Dunrose's property in Germiston.
Therefore, the merging parties are not competitors.
[11]
In
light of the above, the Commission concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition
in the relevant market.
[12]
At
the hearing, the Tribunal queried about what exactly is being
acquired in the proposed transaction. The Commission's report only
spoke to the property in Germiston and skipped over Dunrose's 50%
share capital in Kingsgate. Any firm acquiring Dunrose would
in fact
be acquiring two properties in the Tribunal's view. In response, the
merging parties broke down the structure of Kingsgate
and its
activities. Kingsgate owns 30% of Kingsgate Value Mall ("Kingsgate
Mall) which in turn, owns a vacant stand in Klipriviersoog,
Soweto.
[1]
Meaning Dunrose owns 15% of that asset.
[2]
This vacant stand was acquired 8 years ago with a view to developing
it into a shopping centre.
[3]
Such a development has not taken place and due to the current
climate, it is highly unlikely that it will take place in the
future.
[4]
GPPE is therefore acquiring one active property and 15% of
undeveloped land.
[13]
Given
that the merging parties provided clarity on what exactly is being
acquired and considering the nature of the proposed transaction,
we
have no reason to doubt the Commission's conclusion that the proposed
transaction is unlikely to substantially prevent or lessen
competition in the relevant market.
Public
interest
[14]
The merging parties confirmed that the
proposed transaction will not have any negative effects on employment
in South Africa.
[15]
The proposed transaction raises no other
public interest concerns.
Conclusion
[16]
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 public interest concerns arise from
the proposed transaction. Accordingly, we approve the proposed
transaction unconditionally.
Mr Norman Manoim
Ms Adiswa Ndoni and Mr Halton
Cheadle concurring.
29
October 2018
Date
Tribunal
Researcher:
Hlumelo Vazi
For
the merging parties:
V Chetty
of Vani Chetty Competition Law
For
the Commission
I Mhlongo and W Gumbie
[1]
Transcript, pg 3.
[2]
Transcript, pg 4.
[3]
Transcript, pg 3.
[4]
Transcript, pg 3.