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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM096Oct21
SKG Properties Fund I (Pty) Ltd (Primary Acquiring Firm)
And
Tocolog (Pty) Ltd (Primary Target Firm)
Heard on: 13 December 2021
Order Issued on: 13 December 2021
REASONS FOR DECISION
[1] On 13 December 2021, the Competition Tribunal unconditionally
approved a large merger whereby SKG Properties Fund I (Pty) Ltd (“SKG
I”) will acquire 80% of the shares in Tocolog (Pty) Ltd (“Tocolog”).
[2] The acquiring firm, SKG I does not control any firm but is controlled by
SKG Property Holdings (Pty) Ltd (“SKG Property Holdings”) , which is in
turn c ontrolled by SKG Properties (Pty) Ltd (“SKG Properties”) . SKG
Property Holdings is ultimately controlled by the JP du Plessis Family
Trust (“JDP Trust”).1
[3] Tocolog is wholly owned by Elegant Property Trust (“EPT”). The trustees
of EPT are Historically Disadvantaged Persons (“HDPs”). As part of the
proposed transaction, EPT will transfer the following immovable
properties (the “Target Properties”) to Tocolog, being:
3.1. The immovable properties and rental enterprises known as
Portion 168 (of 27) of the farm Uitkomst and Doornrug No 852
(Cato Ridge Property) in KwaZulu-Natal; and
3.2. Portion 1 of Erf 5437, Kosmosdal Extension 88” (Centurion
Property”) in Gauteng.2
[4] Tocolog is a special purpose vehicle shelf company with no prior history
of trading.
[5] Post-merger, Tocolog will wholly own the Target Properties. SKG I will
establish a new form of direct control over Tocolog (through its 80%
shareholding) and indirect control over the Target Properties. EPT will
retain a form of negative control over Tocolog through its 20%
shareholding in Tocolog.
1 JDP Trust and all firms that it controls shall be referred to as the “Acquiring Group”.
2 Tocolog and the Target Properties will be referred to as “Target Group”.
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Competition Assessment
[6] When considering the merging parties’ activities, the Competition
Commission (“Commission”) found that the proposed transaction will
give rise to two horizontal overlaps:
6.1. The provision of light industrial property, and
6.2. The provision of grade P office property.
[7] Based on the above, the Commission assessed the following markets:
7.1. The market for the provision of light industrial property in the
greater Centurion area; and
7.2. The market for the provision of rentable Grade P office properties
in the greater Centurion area which include areas that are 15km
within the Target Properties in Centurion.
The market for the provision of light industrial property in greater Centurion area
[8] The Commission found that the merged entity will have a combined post-
merger market share of less than 10 % with a negligible market share
accretion in Centurion and surrounds . Further, t here are several
alternative rentable light industrial properties within 15km of the Target
Group in Centurion and surrounding areas including in Gateway
Industrial Park and Samrand Business Park, lo cated 1.1km and 6.6km
from the Target Property, respectively.
The market for the provision of rentable Grade P office properties in the greater
Centurion area which include areas that are 15km within the Target Properties
in Centurion
[9] The merged entity’s market share will be between 30-40% with a market
share accretion of less than 2% in relation to lettable P grade office space
in the Centurion node. The Commission was of the view that the
proposed transaction is unlikely to have a significant effect on the
structure of the market in the Centurion node as the market share
accretion is less than 2% . Furthermore, t here are several office
properties which will continue to compete with the merged entity post -
merger, including commercial properties located at 90 Samrand Road,
Byls Bridge, 186 Witch Hazel Street and Witch -Hazel Avenue amongst
others.
Byls Bridge, 186 Witch Hazel Street and Witch -Hazel Avenue amongst
others.
[10] No third parties raised any concerns relating to the proposed merger.
[11] Based on the above, the Commission was of the view that the proposed
transaction is unlikely to substantially prevent or lessen competition.
Public Interest
Employment
[12] The merging parties submitted that the Target Group does not hav e
employees and the Acquiring Group’s employee representative indicated
that the employees of the Acquiring Group have no concerns regarding
the proposed transaction. The merging parties provided an unequivocal
statement that the proposed transaction will not result in any detrimental
effect on employment. Specifically, no merger -related retrenchments or
job losses will occur.
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Spread of ownership
[13] Pre-merger, the Acquiring Group has no BEE shareholders or employee
share scheme. The Target Properties are ultimately controlled by EPT, a
firm that is 100% owned by HDPs.
[14] The Commission found that post-merger, the shareholdings by HDPs in
the Target Properties will decrease from 100% to 20%. This is because
EPT will only retain 20% shareholdings in the Target Properties and will
have negative control over the Target Properties.
[15] The merging parties, however, submitted that the proposed transaction
would assist the trustees of EPT who are HDPs to extinguish their debt
and still remain joint controllers of Target Properties. In this regard, the
internal board documents of Tocolog indicated that Tocolog will assume
the debt of EPT in relation to the Cato Ridge property and Tocolog will
assume existing debt in respect of the Centurion property. The proposed
transaction will therefore enable EPT to settle the existing debt of the
Target Properties.
[16] We conclude that the proposed transaction is unlikely to substantially
prevent or lessen competition in any relevant market . Furthermore, on
balance, it raises no substantial public interest concerns.
13 December 2021
Ms Mondo Mazwai Date
Ms Yasmin Carrim and Mr Andreas Wessels concurring
Tribunal Case Manager: Camilla Mathonsi
For the Merging Parties: Susan Meyer and Charissa Barden of Cliffe
Dekker Hofmeyr Inc
For the Commission: Yolanda Okharedia and Themba Mahlangu