About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2019
>>
[2019] ZACT 10
|
|
Liberty Group Ltd and 2 Degrees Properties (Pty) Ltd v Khora Investments (Pty) Ltd in respect of Khora's 30% undivided share in Botshabelo Mall Properties and the Letting business conducted thereon (LM220Nov18) [2019] ZACT 10 (11 February 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM220Nov18
In
the matter between:
Liberty
Group Ltd and 2 Degrees Properties (Pty) Ltd
Acquiring Firms
and
Khora
Investments (Pty) Ltd in respect of Khora's
Target firm
30%
undivided share in Botshabelo Mall
Properties
and the Letting business
conducted
thereon
Panel
:
Yasmin Carrim (Presiding Member)
:
lmraan Valodia (Tribunal Member)
:
Mondo Mazwai (Tribunal Member)
Heard
on :
30 January 2019
Order
Issued on : 30 January 2019
Reasons
Issued on : 11 February 2019
Reasons
for Decision
Approval
[1]
On
30 January 2019, the Competition Tribunal ("Tribunal")
approved a property transaction between Liberty Group Ltd
("Liberty"),
2 Degrees Properties (Pty) Ltd ("2
Degrees") and Khora Investments (Pty) Ltd ("Khora") in
respect of Khora's
30% undivided share in the Botshabelo Mall
Properties ("Botshabelo Mall") and the letting business
conducted thereon.
[2]
The
reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firms
[3]
The
primary acquiring firms are Liberty and 2 Degrees, companies duly
incorporated in accordance with the laws of the Republic of
South
Africa.
[4]
Liberty
is a wholly-owned subsidiary of Liberty Holdings Limited, a company
publicly listed on the Johannesburg Stock Exchange ("JSE").
Liberty Holdings is a subsidiary of the Standard Bank Group Limited
which is not controlled by any firm.
[5]
2
Degrees is a wholly-owned subsidiary of Liberty Two Degrees Limited
("New L2D"). New L2D is a portfolio established
under the
Liberty 2 Degrees Scheme and is ultimately controlled by Liberty.
[6]
Liberty
is a long-term insurance provider in the financial services sector.
In addition, it owns various properties in the hospitality,
retail
and office space sectors.
[7]
New
L2D is a collective investment scheme in property in the form of a
trust established in terms of the Collective Investment Schemes
Control Act.
[1]
[8]
Collectively
the acquiring firms will be referred to as the 'acquiring group'.
Primary
target firm
[9]
The
primary target firm is Khora's 30% undivided share in Botshabelo Mall
and the letting business conducted thereon ("target
business").
Botshabelo Mall is situated in the Botshabelo area of the Free State
Province. It leases out rental space to a
number of different tenants
including, amongst others, Pick n Pay, Shoprite, Cashbuild and
Truworths.
[10] The
remaining 70% of the target business is controlled by the acquiring
firms.
[11]
Khora,
the seller, is controlled by the Bokoena Family Trust and was, pre
transaction, afforded minority protection rights
with respect to the
target business in terms of the co-ownership agreement it had entered
into with the acquiring firms.
Proposed
transaction and rationale
[12]
The
financial difficulties experienced by Khora, resulting in the company
being incapable of meeting its credit obligations, have
given rise to
the proposed transaction. Investec Limited ("Investec"),
one of Khora's creditors, instituted a High Court
application for the
liquidation of Khora. Investec and Khora eventually agreed to settle
the litigation on the terms that Khora's
30% undivided share in the
target business shall be transferred to Investec.
[13]
Following
the implementation of the above-mentioned settlement agreement,
Investec has agreed, by virtue of a sale agreement, to
the transfer
of Khora's 30% undivided share to Liberty and 2 Degrees. Post-merger,
the Target Business will be wholly-owned by
Liberty and New L2D.
However, the shares would first have to be transferred to Investec.
[14]
Investec
reassured the Commission that the proposed transaction is simply a
means of recovering the loan facility provided to Khora
and to comply
with the terms of the settlement agreement which was made an order of
court. The transfer of the shares to Investec
and then to the
acquiring group will take place almost simultaneously.
[15]
The
Commission was satisfied that the transfer of the undivided shares to
Investec will not amount to a merger according to the
Commission's
Practitioner's Update, Issue 4, entitled
"The
application of merger provisions of the
Competition Act 89 of 1998
,
as amended, to risk mitigation financial transactions"
as
Investec will hold the shares for less than 12 months for the purpose
of risk management and with the objective of selling them
on to
Liberty.
[2]
[16]
In
terms of the rationale, the acquiring firms submitted that the
transaction presents them with the ability to exercise sole control
over the target business, enjoy the full income and benefits and
allow them to manage the business better.
[17]
Khora
confirmed that the proposed transaction stems from its inability to
meet its credit obligations.
Impact
on competition
[18]
The
Commission considered the activities of the merging parties and found
that there appeared to be a horizontal overlap between
the activities
of the merging parties in relation to the provision of rentable
retail properties.
[19]
Although
there was an overlap, the Commission concluded that there was no
geographical overlap between the activities of the merging
parties as
the nearest retail property controlled by the Acquiring Group is
situated in Johannesburg (Melrose Arch) which is 410
km from the
target business.
[3]
[20]
The
Commission was also satisfied that the current property management
agent, JHI Retail (Pty) Ltd ("JHI'), would be retained
post-merger. Particularly after discovering that Liberty Holdings
Limited owns 49% of the shares in, and exercises joint control
over,
JHI.
[21]
The Commission found no vertical overlap
between the activities of the parties.
Public
interest
[22]
The
merging parties submitted that the proposed transaction will have no
adverse effect on employment because it simply involves
move from
joint to sole control .
[4]
[23]
The
Commission was of the view that the proposed transaction is unlikely
to raise employment concerns as.
[24]
The
Commission was of the view that the proposed transaction is unlikely
to raise concerns on any other public interest grounds.
Conclusion
[25]
In
light of the above, we concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition in
any
relevant market and raised no public interest concerns. Accordingly,
we approved the proposed transaction unconditionally.
Ms
Yasmin Carrim
Prof
AW Wessels and Ms Mondo Mazwai concurring
11 February 2019
DATE
Case
Manager:
Helena
Graham
For
the merging parties: Desmond Rudman of
Webber Wentzel
For
the Commission:
Rakgole Mokolo
[1]
45 of 2002.
[2]
See
Competition Commission v Standard Bank of South Africa Ltd
FTN228Feb16.
[3]
According to the Commission, the Competition Tribunal ("Tribunal')
has, in previous cases, accepted that shopping complexes
situated
outside a 1O km radius of each other do not impose a competitive
constraint upon one another. See
Sycom Property Fund Collective
Investment Scheme in Property
and
AECI Pension Fund in
respect of the property letting enterprise known as "Somerset
Mall" and in Somerset Mall Property
Management Company (Pty)
Ltd;
and
Redefine Properties Limited
and
Hyprop
Investments Limited in respect of
a
50% undivided share of
the business enterprise known as South Coast Mall.
[4]
See Commission's Recommendations page 18.