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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM058Jul20
In the matter between
EA Waterfall Logistics JV Proprietary Limited Primary Acquiring Firm
And
Truzen 116 Trust in respect of an undivided half
share of the property letting enterprise known as
Cummins
Primary Target Firm
Panel : Mr E Daniels (Presiding Member)
: Mr AW Wessels (Tribunal Member)
: Prof. H Cheadle (Tribunal Member)
Heard on : 5 August 2020
Order Issued on : 5 August 2020
Reasons Issued on
: 3 September 2020
REASONS FOR DECISION
APPROVAL
[1] On 5 August 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger between EA Waterfall Logistics JV Proprietary Limited
and Truzen 116 Trust in respect of an undivided half share of the property letting
enterprise known as Cummins.
[2] The reasons for the approval of the proposed transaction follow.
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PARTIES TO THE PROPOSED TRANSACTION
Primary acquiring firm
[3] The primary acquiring firm is EA Waterfall Logistics JV Proprietary Limited (“EA
Waterfall Logistics”). EA Waterfall Logistics does not control any firm. 1 EA
Waterfall Logistics is controlled by Equites Property Fund Ltd (“Equites”).
Equites controls numerous firms, and is itself not controlled by any single firm.
[4] Equites is a listed real estate investment trust with a focus on owning and
developing modern logistics properties for the purposes of letting. EA Waterfall
Logistics and Eq uites, together with all the firms controlled by Equites , will
jointly be referred to as the “acquiring group”.
[5] The acquiring group has a large property portfolio in South Africa. The acquiring
group’s rentable light industrial property portfolio is relevant for the purposes of
the proposed transaction.
Primary target firm
[6] The primary target firm is Truzen 116 Trust (“Truzen Trust”) in respect of an
undivided half share of the property letting enterprise known as Cummins (the
“target property”).2 The Truzen Trust is not controlled by any single firm . The
Truzen Trust only controls the target property, which it jointly controls with EA
Waterfall Logistics.
[7] The target property is situated in Woodmead, Gauteng and comprises
approximately 21,044 m 2 of rentable light industrial space . The current tenant
in the target property is Cummins South Africa (Pty) Ltd (“Cummins”).
1 EA Waterfall Logistics’ joint control of the target property is discussed later.
2 The target property includes the property, the enterprise assets, the leasehold rights and the lease
agreements.
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PROPOSED TRANSACTION AND RATIONALE
[8] EA Waterfall Logistics, who currently owns an undivided 50% share of the
target property, intends to acquire the remaining 50% of the target property from
the trustees of the Truzen Trust. Post -merger, EA Waterfall Logistics will
exercise sole control over the target property.
[9] Equites’ acquisition of the remaining shares in the target property is part of its
growth strategy . For Truzen Trust , the proposed transaction affords it the
opportunity to realise its share of the value in the target property in favour of its
beneficiaries.
RELEVANT MARKET AND IMPACT ON COMPETITION
[10] The Competition Commission (“ Commission”) considered the activities of the
merging parties and found that the proposed transaction results in a horizontal
overlap in the provision of rentable light industrial properties. This is because
the target property is a rentable light industrial property, and the acquiring group
controls numerous rentable light industrial properties.
[11] The Commission concluded that the relevant product market was the provision
of rentable light industrial property , and that the relevant geographic market
comprised of industrial nodes within a 15km radius of the target property. As a
result, the Commission as sessed the effects of the proposed transaction on
rentable light industrial propert y located within a 15km radius of the target
property.3
[12] The Commission estimated that the merged entity would have a combined
market share of 26% following an accretion of 1%.4 Competitors of the merging
parties also informed the Commission that there are numerous rentable light
industrial properties within a 15km radius of the target property . The
Commission also found that the acquiring group already jointly owns the target
3 Situated in Beatty Street, Woodmead, Gauteng Province.
4 The Commission attributed 50% of the target property to each of the merging parties for the
purposes of estimating the market shares
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property. In light of these findings, t he Commission found that the proposed
transaction was unlikely to alter the structure of the relevant market.
[13] The Commission assessed any potential changes in incentives that could arise
since the merger would result in a change from dual to sole control. In this
regard, t he Commission interviewed Cummins , being the only tenant in the
target property. Cummins submitted that there are no other properties available
that are suitable for its needs, and that it does not have any concerns regarding
the proposed transaction.
[14] In light of the above, the Commission concluded that the proposed transaction
was unlikely to substantially lessen or prevent competition in the market for the
provision of rentable light industrial property within a 15 km radius of the target
property. We found no reason to disagree.
PUBLIC INTEREST
[15] The Commission contacted the employee representative of the acquiring group
who submitted that no employees raised any concerns regarding the proposed
transaction.5 The Commission also found no evidence of planned
retrenchments by the merging parties. Furthermore, t he merging parties
submitted that the proposed transaction would not have any adverse effects on
employment, and that no retrenchments or job losses w ould occur as a result
of the merger.
[16] The Commission also considered whether the proposed transaction would
have any impact on third party services providers. The merging parties
submitted that the acquiring group is responsible for managing the target
property and would continue to do so post-merger.
[17] The Commission found that the proposed transaction was unlikely to raise any
other public interests concerns.
5 Neither Truzen Trust nor the target property had any employees.
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CONCLUSION
[18] In light of the above, we concluded that the proposed transaction was unlikely
to substantially prevent or lessen competition in the market for the provision of
rentable light industrial property within a 15 km radius of the target property. In
addition, we are of the view that no public interest concerns arise from the
proposed transaction.
[19] Accordingly, we approved the transaction without conditions.
3 September 2020
Mr Enver Daniels Date
Mr Andreas Wessels and Prof. Halton Cheadle concurring
Tribunal Case Manager:
P Kumbirai
For the Merging Parties: V Chetty of Vani Chetty Competition Law
For the Commission: B Chomela and G Mutizwa