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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM038Jun20
In the matter between
Equites Property Fund Ltd Primary Acquiring Firm
And
Retail Logistics Fund (Pty) Ltd Primary Target Firm
Panel : M Mazwai (Presiding Member)
: E Daniels (Tribunal Member)
: I Valodia (Tribunal Member)
Heard on : 2 September 2020
Order Issued on : 3 September 2020
Reasons Issued on
: 26 October 2020
REASONS FOR DECISION
Unconditional Approval
[1] On 2 September 2020, the Competition Tribunal (“Tribunal”) unconditionally
approved the proposed transaction in terms of which Equites Property Fund Ltd
(“Equites”) intends acquiring control over Retail Logistics Fund (Pty) Ltd (“Retail
Logistics”).
[2] The reasons for the approval of the proposed transaction follow.
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Parties to the transaction
[3] The primary acquiring firm is Equites, a Real Estate Investment Trust (REIT)
listed on the JSE. Equites is not controlled by any single shareholder . Equites
directly and indirectly controls numerous firms viz., EA Waterfall Logistics JV,
Equites Atlantic Hills and Prop-For-List, amongst others.
[4] Equites owns and develops logistics properties in South Africa (SA) and the UK
for purposes of long -term letting. Within SA, Equites owns logistics properties
(i.e. distribution centres), non -logistics and commercial properties located in
Gauteng, the Western Cape and Kwa -Zulu Natal provinces. Of relevance for
the competition assessment in this proposed transaction are Equites’ logistics
properties located in Gauteng and the Western Cape.
[5] The target firm is Retail Logistics, a newly incorporated private company which
is wholly owned by Shoprite Checkers (Pty) Ltd (“Shoprite”). In turn, Shoprite is
wholly owned by Shoprite Holdings Ltd.
[6] Retail Logistics was incorporated for the purpose of establishing a joint venture
(JV) between Shoprite and Equites. Currently, Retail Logistics does not conduct
any business activities. Retail Logistics will own the following properties: (i) The
Brackenfell Property in the Western Cape; (ii) The Centurion Property in
Centurion (Gauteng); and (iii) The Cilmor Property in the Western Cape. The
three properties will be collectively referred to as the “Properties”.
[7] The Properties comprise of distribution centres and warehouses that are
utilised and occupied by Shoprite. The business of Retail Logistics will entail
the acquisition, development, ownership, operation and leasing of retail
logistics facilities only to Shoprite or its affiliates, or to third party suppliers of
Shoprite or its affiliates, as the tenant, and any ancillary business directly
related thereto.
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Proposed transaction
[8] Equites intends to acquire 50.1% of the issued shares in Retail Logistics from
Shoprite. The proposed transaction entails a series of steps which will
culminate in (i) Equites acquiring sole control of Retail Logistics and (ii) the
acquisition of the Properties by Retail Logistics. Post-merger, Shoprite will hold
an equity interest in Retail Logistics and continue to utilise and occupy the
Properties through long-term leases.
Relevant market and impact on competition
[9] The Competition Commission (“Commission”) found that the proposed
transaction presents a horizontal overlap in the market for the provision of
lettable light industrial property. This is because Equites owns distribution
centres in Gauteng and the Western Cape , while the Properties to be owned
by Retail Logistics are also distribution centres which are located in the Western
Cape and Gauteng.
Light industrial property in Gauteng
[10] Retail Logistics will own one light industrial property in Centurion. On the other
hand, Equites owns numerous light industrial properties in Gauteng. The
Commission found that although there is a product overlap in the light industrial
property portfolios of the merging parties, there is no geographic overlap.
Therefore, the Equites p roperties are unlikely to pose any competitive
constraint on the Retail Logistics property in Centurion.
Light industrial property in the Western Cape
[11] Retail Logistics will own two light industrial properties which are located in
Brackenfell, Western Cape (Brackenfell and Cilmor properties). On the other
hand, Equites owns numerous light industrial properties in different areas in the
Western Cape. The Commission found that the proposed transaction presents
a geographic overlap in the Brackenfell, Parow, Bellville and surrounding nodes
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within a 15km radius of Brackenfell. The Commission found that the merged
entity will have a market share of approximatel y <49%, with an accretion of
<42%.
[12] Notwithstanding the sizable market share accretion, the Commission found that
the proposed transaction will unlikely result in any structural changes within the
relevant market as the Properties are already solely utilised by Shoprite and the
status quo will be maintained post-merger. Further, the Commission found that
the merged entity will be constrained by market participants who account for a
combined market share of more than 50%. These include property companies
like Growthpoint1 and SA Corporate Real Estate.2
[13] Due to the above, the Commission concluded that the proposed transaction will
not significantly alter the structure of the relevant market and is unlikely to result
in a substantial prevention or lessening of competition. We found no reason to
disagree with the Commission.
Public interest
[14] The proposed transaction raises no public interest concerns.
Conclusion
[15] 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.
26 October 2020
Ms Mondo Mazwai Date
Mr Enver Daniels and Prof. Imraan Valodia concurring.
1 Commission’s Recommendation, pg. 22.
2 Commission’s Recommendation, pg. 22.
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Tribunal Case Manager
: Kgothatso Kgobe
For the Merging Parties : P Krusche and Y Davidson of Werksmans
For the Commission : R Molotsi