COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM129Oct22
In the matter between:
Redefine Properties Limited Primary Acquiring Firm
and
VDMV Brackengate 2 (Pty) Limited Primary Target Firm
Approval
[1] On 02 November 2022, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger whereby Redefine Properties Limited (“Redefine
Properties”) intends to acquire the remaining 49.9% undivided share in the
property letting enterprise known as Massmart Brackengate from VDMV
Brackengate 2 (Pty) Ltd (“VDMV Brackengate”). Post-merger, Redefine
Properties will hold 100% of Massmart Brackengate’s issued shares and
acquire sole control over Massmart Brackengate.
Panel : S Goga (Presiding Member)
: M Mazwai (Tribunal Member)
: F Tregenna (Tribunal Member)
Heard on : 02 November 2022
Order issued on : 02 November 2022
Reasons issued on : 13 December 2022
REASONS FOR DECISION
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm is Redefine Properties, which is not controlled by
any single shareholder. Redefine Properties is a Real Estate Investment Trust
("REIT") that is publicly listed on the Johannesburg Stock Exchange ("JSE").
[3] Redefine Properties’ property portfolio comprises a diverse range of properties
including office, retail, residential and industrial space situated throughout
South Africa.
Primary target firm
[4] The primary target firm is VDMV Brackengate, in respect of a 49.9% undivided
share in the property letting enterprise known as Massmart Brackengate
(“Target Property”).
[5] VDMV Brackengate is partially controlled by VDMV Property Holdings which is
in turn controlled by VDMV Property Group (Pty) Ltd.
[6] VDMV Brackengate is an investment property fund, which forms part of the
wider VDMV group, with a diversified investment, commercial and industrial
property portfolio.
Proposed transaction and rationale
Transaction
[7] In terms of the proposed transaction, Redefine Properties will acquire the
remaining 49.9% undivided share in the property letting enterprise known as
Massmart Brackengate from VDMV Brackengate. Post-merger, Redefine
Properties will exercise sole control over Massmart Brackengate.
Rationale
[8] The primary acquiring firm submits that the proposed transaction will
complement the size and quality of Redefine Properties’ industrial portfolio. This
will further advance Redefine Properties’ investment strategy in a more
accretive asset portfolio through the alignment of prime and quality assets at
attractive yields.
[9]
Competition Assessment
Relevant Market
[10] In defining the relevant product market, the merging parties relied on data from
the South African Property Owners' Association ("SAPOA”). In addition, the
merging parties relied on earlier Tribunal decisions in the Primegro Properties
Limited and Growthpoint Properties Limited1 case, and in the Investec Property
Limited and Edgardale Properties case, where the Tribunal accepted that light
industrial property included logistics/warehouse space.2 The merging parties
submitted that the market is the market for rentable light industrial space.
Furthermore, from a geographic market perspective, they consider the
catchment to be within a geographical node within a 12km radius.
[11] The Competition Commission (“the Commission”) assessed the activities of the
merging parties and found that the proposed transaction does present a product
overlap as the acquiring firm, and target firm both own and control rentable light
industrial properties. Redefine Properties owns 7 rentable light industrial
properties located within a 12 km radius of the Target Property.
[12] However, due to the competition analysis, the Commission found it
unnecessary in this case to definitively define the relevant product market.
Competition analysis
[13] The Commission noted that overlaps in the merging parties' industrial property
portfolios exist since Redefine Properties currently holds 50.1% of the Target
Property.
[14] The Commission concluded that the proposed transaction is therefore unlikely
to significantly lessen or prevent competition in any relevant market given that
it would transfer ownership of the Target Property from joint to sole ownership
and would not result in growth in market share after the merger.
[15] No third-party concerns were raised regarding the transaction.
[16] Having considered the above, the Tribunal is of the view that the proposed
transaction is unlikely to result in substantial prevention or lessening of
competition in any relevant market.
competition in any relevant market.
1 Primegro Properties Limited and Growthpoint Properties Limited, Case No.: 29/LM/Jun03.
2Investec Property Limited and Edgardale Properties, Case No.: 20/LM/Mar11. See also
Redefine Properties Limited and Chantilly Trading 95 (Pty) Ltd in respect of the property letting
enterprise known as Ellerines Warehouse Cato Ridge, Tribunal case number 01774 (31
October 2013).
Public Interest
Effect on employment
[17] The Commission considered whether the proposed transaction would have an
adverse effect on employment. The merging parties submitted that the property
management functions of Massmart Brackengate are provided by VDMV
Property Management and will be managed by Redefine going forward.
Employees currently involved in the management of Massmart Brackengate will
continue to work for VDMV Property Management since they are not entirely
dedicated to the Massmart Brackengate property.
[18] The Commission engaged with the Acquiring Group and Target Firm’s
employees are not represented by any trade union, who confirmed that the
employees did not raise any concerns in connection with the proposed
transaction. As a result, the Commission concluded that proposed transaction
is unlikely to raise employment concerns.
Effect on the spread of ownership
[19] The Commission further assessed the impact on a greater spread of ownership.
According to the merging parties, Massmart Brackengate is currently owned
50.1% by Redefine Properties and 49.9% by VDMV Brackengate. Redefine will
post-merger have sole control over Massmart Brackengate. VDMV
Brackengate is not currently owned or controlled by HDP. Redefine Properties
is a level 1 B-BBEE contributor.
[20] After considering the above, the Commission concluded that the proposed
transaction is unlikely to have a negative impact on the promotion of a greater
spread of ownership.
Conclusion
[21] Considering the above, the Tribunal concludes that the proposed transaction is
unlikely to significantly reduce or lessen competition in any relevant market.
Furthermore, there are no public interest concerns raised by the transaction.
13 December 2022
Presiding Member
Ms Sha’ista Goga
Date
Concurring: Ms Mondo Mazwai and Professor Fiona Tregenna
Tribunal Case Managers : Baneng Naape
For the Merging Parties : Vani Chetty of Vani Chetty Competition Law
For the Competition : Inga Macingwane and Thabelo Masithulela