COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM154Dec22
In the matter between:
Unico Property Partners Proprietary Limited Acquiring Firm
and
Khumonetix Proprietary Limited in Respect of 6
Industrial Properties
Target Firm
Approval
[1] On 22 February 2023, the Competition Tribunal unconditionally
approved the large merger wherein Unico Property Partners Proprietary Limited
(Unico Property Partners) intends to acquire 6 (six) industrial properties (Target
Properties) from Khumonetix Proprietary Limited (Khumonetix). On completion
of the proposed transaction, Unico Property Partners will own and control the
Target Properties. Five of the Target Properties are located in Jet Park, and the
other one is located in Glen Marais, Gauteng.
Panel : Jerome Wilson (Presiding Member)
: Tregenna Fiona (Tribunal Panel Member)
: Imraan Valodia (Tribunal Panel Member)
Heard on : 22 February 2023
Order issued on : 22 February 2023
Reasons issued on : 22 March 2023
REASONS FOR DECISION
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm is Unico Property Partners Proprietary Limited (Unico
Property Partners).
[3] Unico Property Partners will be 100% controlled by an investment vehicle
[4] Investment SPV will, in turn, be jointly controlled by Shareholder SPV, RMB
Investments and Advisory Proprietary Limited (RMBIA) and Nedbank Limited
(Nedbank).
[5] Unico Property Partners does not control any firm.
[6] Unico Property Partners, its shareholders and their respective corporate groups
[7] Unico Property Partners is a newly established property investment company
and does not currently own any properties. The primary activity of Unico
Property Partners is to hold the Target Properties.
Primary target firm
[8] The primary target firm is Khumonetix Proprietary Limited (Khumonetix) in
respect of 6 (six) industrial properties (Target Properties).
[9] The Target Properties are owned and controlled by Khumonetix.
[10] Khumonetix is owned and controlled by the Michael Family Trust.
[11] The Target Properties are involved in the letting of light industrial property.
Proposed transaction and rationale
Transaction
[12] In terms of the proposed transaction, Unico Property Partners intends to acquire
the Target Properties from Khumonetix. Post-merger, Unico Property Partners
will own and control the Target Properties.
Rationale
[13] The Acquiring Group submits that the proposed transaction provides an
opportunity for Unico Property Partners to acquire a portfolio of quality industrial
buildings in Gauteng from a single seller. The intention is to grow the portfolio
over time and to expand the footprint of the company within South Africa utilising
the combined experience and know-how of the shareholders.
[14] Khumonetix submits that it wishes to realise the best value for the 6 (six)
industrial properties being disposed of. Khumonetix views this transaction as an
attractive business opportunity especially after the challenging Covid-19
pandemic and it is hoping that the proceeds from the current transaction will
boost its cash flow.
Relevant market and impact on competition
[15] considered the activities of
the merging parties and found that the proposed transaction will result in a
horizontal overlap in the market for the provision of rentable light industrial
property.
[16] Based on Commission and Tribunal precedent,1 the Commission considered the
competitive effects of the merger in rentable light industrial property within a
15km radius of the Target Properties, and whether there are alternative light
industrial properties in the area.
[17] Commission found that the Target
Properties have an estimated market share in the range of [1-5]% in the relevant
market, and that there are approximately 176 alternative light industrial
properties in the relevant geographic area.
[18] The Commission found that the only potential overlap in the relevant market is
vacant land known as Rand Airport Commercial Park, which is owned by
Nedbank. This land is zoned as light industrial property and is located
approximately 9.93km from the Target Properties located in Jet Park, and
approximately 18.78km from the Target Property located in Glen Marais. The
development of this vacant land will commence in early 2023 with an estimated
tenant occupation date of August 2023.
tenant occupation date of August 2023.
1 Equites Property Fund Ltd/ Retail Logistics Fund (Pty) Ltd (Case No. LM038Jun20); EA Waterfall Logistics
JV (Pty) Ltd/ Truzen 116 Trust (Case No. LM058Jul200).
[19] Given the low estimated market share of the Target Properties, the Commission
found that it is unlikely that the development of the Nedbank vacant land will give
rise to any horizontal concerns in the relevant market.
Assessment of possible information exchange
[20] The Commission also noted that some shareholders of the Acquiring Group (
) are also directors in Vukile Property Fund Limited (Vukile), a
company that focuses mainly on rentable retail property.
[21] The Commission found that Vukile currently owns one light industrial property
that competes with the Target Properties, namely Midrand Sanitary City, which
is located approximately between 7.32km and 15.93km from the Target
Properties.
[22] The Commission therefore assessed whether the merger is likely to result in the
sharing of competitively sensitive information between competitors in the
relevant market.
[23] The merging parties submitted, in this regard, that Vukile intends to convert
Midrand Sanitary City for occupation by a big box retailer, and that it accordingly
will not be utilised as an industrial space. As such, the merging parties submit
industrial space, and that this is consistent
to dispose of non-retail properties.
[24] In light of the above, the merging parties submit that, since Vukile and Unico
Property Partners are not competitors in the relevant market, there is no risk of
competitively sensitive information being shared between them as a result of the
merger.
[25] strategy is to dispose of
its non-retail properties and established that Midrand Sanitary City already has
a retail tenant. The merging parties also confirmed that Mr Rapp and Cohen
would not be directors of Unico post-merger.
[26] Considering the above submissions, the Commission concluded that the
proposed transaction is unlikely to result in the exchange of competitive sensitive
information between competitors and, more generally, that the proposed
information between competitors and, more generally, that the proposed
transaction is unlikely to substantially prevent or lessen competition in the
relevant market.
[27] No third parties raised concerns regarding the effects of the proposed
transaction on competition.
[28] Having regard to the above,
assessment that the proposed transaction is unlikely to substantially prevent or
lessen competition in the relevant market.
Public interest
Effect on employment
[29] The merging parties submitted that there will be no retrenchments or job losses
arising from the proposed merger, and no adverse effect on employment.
[30] The merging parties stated in this regard that the property management
functions of the Target Properties are currently provided internally by Michael
Family Trust and will be managed by Unico Property Group Proprietary Limited
(Unico Property Group) post-merger. Unico Property Group is a newly
established property management company, the primary activity of which will be
to manage the Target Properties going forward. The merging parties highlighted
that the employees currently involved in the management of the Target
Properties will continue to be employed by Michael Family Trust in the
.
[31] The Commission also established that no concerns were raised by employees
regarding the effects of the proposed transaction.
[32] The Commission therefore concluded that the proposed transaction will not have
an adverse effect on employment.
[33] We agree that the proposed transaction is unlikely to have a negative impact on
employment in South Africa.
Effect on the spread of ownership
[34] The Commission engaged the merging parties on the question of whether the
proposed transaction promotes a greater spread of ownership, in particular, by
increasing the levels of ownership by historically disadvantaged persons and
workers in firms in the market, within the meaning of section 12A(3)(e) of the
Competition Act.
[35] The Commission found that the Target Properties are not currently controlled by
historically disadvantaged persons and have no Black Economic Empowerment
historically disadvantaged persons and have no Black Economic Empowerment
credentials. Post-merger, however, RMBIA and Nedbank will collectively hold
of the shares in Unico Property Partners and will contribute to the promotion
of Black Economic Empowerment in relation to the Target Properties due to their
existing empowerment credentials.
[36] The Commission found in this regard that -BBEE certificate
reflects that it achieved a Level 1 certification under the Financial Sector Charter
scorecard with verified 28.80% black ownership with a significant proportion of
13.59% comprising black woman shareholders. In addition, Nedbank is a Level
1 BEE contributor. Nedbank and its subsidiaries have 40.07% black ownership
with 17.75% black female ownership.
[37] Based on the above, the merging parties submit that the proposed transaction
will promote a greater spread of ownership of firms with shareholders from
historically disadvantaged backgrounds.
Conclusion
[38] Considering the above, the Tribunal concludes that the proposed transaction is
unlikely to substantially prevent or lessen competition in the relevant market and
is not likely to give rise to any negative public interest effects. Accordingly, we
approve the proposed transaction unconditionally.
22 March 2023
Adv. Jerome Wilson Date
Concurring: Prof. Tregenna Fiona and Prof. Imraan Valodia
Tribunal case manager
: Baneng Naape
For the merging parties
:
Vani Chetty of Vani Chetty Competition Law
(Pty) Ltd
For the Commission
:
Billy Mabatamela and Themba Mahlangu