COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM011Apr23
In the matter between:
Capitec Bank Limited Acquiring Firm
and
SPEAR REIT Limited on behalf of the
immovable property and rental enterprise
known as the "Liberty Life Office Building"
Target Firm
Approval
[1] On 20 June 2023, the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger wherein Capitec Bank Limited (“Capitec”) intends to
acquire the office rental enterprise known as the Liberty Life Office Building
(“Target Property”) from Spear Real Estate Investment Trust Limited (“Spear
REIT”). Upon implementation of the proposed transaction, the Target Property
will be controlled by Capitec.
Panel: Liberty Mncube (Presiding Member)
Andiswa Ndoni (Tribunal Panel Member)
Shaista Goga (Tribunal Panel Member)
Heard on: 20 June 2023
Order issued on: 20 June 2023
Reasons issued on: 13 July 2023
REASONS FOR DECISION
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm is Capitec which is a public company incorporated in
accordance with the laws of the South Africa. Capitec is wholly owned by Capitec
Holdings Limited (“Capitec Holdings”). Capitec Holdings is listed on the
Johannesburg Securities Exchange Limited (“JSE”), and as such Capitec
Holdings is not controlled by any single firm.
[3] Capitec Holdings directly and indirectly controls numerous firms in South Africa,
including Capitec Ins (Pty) Ltd; Capitec Properties (Pty) Ltd; Capitec Insurance
Holdings (Pty) Ltd; Capitec Life Ltd and Praelexis (Pty) Ltd.
[4] Capitec controls Mercantile Rental Finance Proprietary Limited. All firms directly
and indirectly controlled by Capitec Holdings are hereinafter referred to as the
“Acquiring Group”.
[5] The Acquiring Group is active in the banking industry focusing on personal and
business banking services. It also offers other financial services such as
insurance. In addition, the Acquiring Group holds a property portfolio which
consists of grade P, A and B office spaces in the Western Cape and Gauteng.
Relevant to the assessment of the proposed transaction is the Acquiring Group’s
property portfolio.
Primary target firm
[6] The primary target firm is the office rental enterprise known as “Liberty Life Office
Building” (“Target Property”) which consist of a grade P office space situated in
Western Cape, Century City with a gross lettable area of 18 244m2.
[7] The Target Property is wholly owned by Spear REIT, a public company
incorporated in accordance with the laws of South Africa. Spear REIT is listed
on the JSE and is not controlled by any firm.
Proposed transaction and rationale
Transaction
[8] In terms of the Sale of Rental Enterprise Agreement, Capitec will acquire the
Target Property as a going concern from Spear REIT. Upon implementation of
the proposed transaction, Capitec will exercise sole control of the Target
Property.
Rationale
[9]
[10]
Relationship between the parties
[11] There is a horizontal overlap in the activities of the merging parties as both the
Acquiring Group and the target firm are active in the provision of rentable office
space.
Relevant markets
[12] The Commission submitted that rental property may be broadly grouped into
retail property, industrial property, office property and other properties such as
residential, motor related outlets, hotels and leisure properties. Relevant to the
proposed transaction is office property.
[13] In the proposed transaction, the Acquiring Group’s property portfolio consists of
grade A, B and P offices and the Target Property is classified as a grade P office.
[14] The Tribunal has previously decided (i.e., Redefine Properties Limited and
Pivotal Fund Limited1 and Redefine Properties Limited, the Pivotal Fund
Limited, Abshelf Proprietary Limited and Cirano 300 Investments
Proprietary Limited2) that office property can be defined according to grades,
namely Grade P, A, B or C.
[15] In the current case, we did not receive any evidence suggesting a departure
from this approach and therefore considered the market for the provision of
grade P office space.
[16] As regards the relevant geographic markets, the merger parties submitted that
the geographic market for office property is defined by regional nodes. The
Tribunal has previously decided (i.e., Momentum and Bonatla3) that the
geographic market for office properties can be defined in terms of nodes.
[17] Given that the Target Property is situated in Century City and the Acquiring
Group does not own any grade P office space in Century City node, the
Acquiring Group owns grade P office space situated in Stellenbosch (which is
47km away from the Target Property), the Commission concluded that there is
no geographic overlap between the grade P office space owned by the merging
parties.
[18] We did not receive any evidence suggesting departure from the above approach
and therefore considered the Century City node as the geographic market.
Competition assessment
[19] The merger parties and the Commission submitted that the proposed merger is
unlikely to substantially prevent or lessen competition as there is no geographic
overlap between the Grade P office space owned by the merging parties.
[20] The Commission contacted the two tenants of the Target Property namely Digital
Outsource Proprietary Limited (“Digital Outsource”) and Liberty Group Limited
(“Liberty Group”).
[21] Digital Outsource did not raise any concerns about the proposed transaction
while no response was received from Liberty Group.
1 Redefine Properties Ltd And Pivotal Fund Ltd, Case No: LM099Sep16, CTZA
1 Redefine Properties Ltd And Pivotal Fund Ltd, Case No: LM099Sep16, CTZA
2 Redefine Properties Ltd, The Pivotal Fund Ltd, Abshelf 04 (Pty) Ltd and Cirano 300 Investments (Pty) Ltd in
Respect of a 75 per cent Undivided Share in Erf 221, Rosebank, Known as The Galleria, Case No: LM168Oct15,
CTZA
3 Momentum Property Investments (Pty) Ltd and Bonatla Property Holdings Ltd, Case No: LM020Jul03, CTZA
[22] Having regard to the above, we received no evidence suggesting that the
proposed merger will likely result in a substantial prevention or lessening of
competition in the relevant markets.
Public interest assessment
Effect on employment
[23] The merging parties submitted that the proposed transaction will not have any
detrimental or negative effects on employment. The employees of the Acquiring
Group are represented by SASBO - The Finance Union (“SASBO”). The Target
Property does not have any employees. The Commission contacted SASBO and
did not receive a response despite follow-up attempts.
[24] The Commission noted that the Target Property is managed by Spear REIT and
will be managed by Capitec, post-merger. The employees that were employed
by Spear REIT to manage the Target Property will continue to be employed by
Spear REIT.
[25] Considering the above, the Commission concluded that the proposed
transaction is unlikely to have a negative effect on employment.
Effect on the spread of ownership
[26] The merging parties submitted that the proposed transaction will not give rise to
any dilution in the spread of ownership by HDPs in South Africa and will have
no negative effect on HDP ownership in South Africa.
[27] Capitec is a level three B-BBEE contributor with 28.66% shareholding by HDPs
while Spear has 9.18% shareholding held by HDPs.
[28] The Commission submitted, on this basis, that the proposed merger does not
raise any concerns with regard to the spread of ownership.
[29] Based on the above, we conclude that the proposed transaction is unlikely to
have a negative effect on the spread of ownership.
Conclusion
[30] For the reasons set out above, the Tribunal approves the proposed transaction
unconditionally.
13 July 2023
Prof. Liberty Mncube Date
Concurring: Ms. Andiswa Ndoni and Ms. Shaista Goga
Tribunal case manager : Baneng Naape
For the merging parties : Susan Meyer of Cliffe Dekker Hofmeyr
For the Commission : Nonhlanhla Msiza and Themba Mahlangu