Acucap Properties Ltd v Parkdev (Pty) Ltd (79/LM/Jul08) [2008] ZACT 86 (6 October 2008)
- Citation
- [2008] ZACT 86
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 79/LM/Jul08
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, Y Carrim
- Case number
- 79/LM/Jul08
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the acquisition by Acucap Properties Ltd of certain assets and shares in Sycom Fund from Parkdev (Pty) Ltd constituted a notifiable large merger due to the change from single to joint control over Sycom Fund. The Tribunal accepted the Commission's findings that the parties' activities overlapped only in certain Grade A office property markets, and that the merged entity's market shares in these markets (Sandton and Environs node: 4.78%, Bryanston node: 7.4%, Greater Woodmead node: 14.66%) were sufficiently low so as not to raise competition concerns. Furthermore, Acucap's provision of property and asset management services was limited to its own properties, and Sycom's provision to third parties did not create a competitive overlap. The Tribunal concluded that the transaction would not substantially prevent or lessen competition and that there were no significant public interest issues. Accordingly, the merger was approved.
Court disposition
Merger approved without conditions.
Orders
- The acquisition by Acucap Properties Ltd of certain assets and shares in Sycom Fund from Parkdev (Pty) Ltd is approved.
- No conditions are imposed on the approval of the merger.
02
Material facts
Parties
Acucap Properties Ltd
Applicant Counsel: Vani ChettyParkdev (Pty) Ltd
RespondentAmounts and remedies
- Sandton and Environs Node Market Share: 4.78
- Bryanston Node Market Share: 7.4
- Greater Woodmead Node Market Share: 14.66
- Sycom Fund Asset Management Market Share: 10.8
- Sycom Fund Property Management Services Market Share: 7.1
- Acucap Retail Assets Value: ZAR 3,500,000,000
- Acucap Offices Value: ZAR 1,500,000,000
- Acucap Total Property Portfolio Value: ZAR 5,000,000,000
- Sycom Retail Assets Value: ZAR 2,600,000,000
- Sycom Offices Value: ZAR 1,800,000,000
- Sycom Total Property Portfolio Value: ZAR 4,400,000,000
03
Procedural history
Posture
Large Merger Review / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition by Acucap Properties Ltd of assets and shares in Sycom Fund from Parkdev (Pty) Ltd triggers a notifiable large merger under competition law.
- 02
Whether the transaction will substantially prevent or lessen competition in the relevant Grade A office property markets.
- 03
Whether there are any significant public interest concerns arising from the transaction.
Party arguments
- Applicant
- Acucap argued that the transaction would create synergies between Acucap and Sycom, benefiting unitholders. The acquisition would result in joint control over Sycom Property Fund Managers and sole control over the property management business, but market shares in the relevant property markets would remain low. Acucap contended that the transaction would not substantially lessen competition and that there were no significant public interest issues.
- Respondent
- Parkdev concurred with Acucap's position, acknowledging that control over Sycom Property Fund Managers equates to control over the Sycom Fund due to regulatory separation between ownership and control. Parkdev agreed that the merged entity's market shares in the overlapping Grade A office property markets were not significant and that the parties were not competitors in the asset and property management services market, as Acucap only provides these services in-house.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A change in control over a property fund from single to joint control triggers the notification requirement for a large merger under the Competition Act.
- 02
Competition Tribunal precedent
A merger is unlikely to substantially prevent or lessen competition if the merged entity's market shares in the relevant markets remain low.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the acquisition by Acucap Properties Ltd of certain assets and shares in Sycom Fund from Parkdev (Pty) Ltd constituted a notifiable large merger due to the change from single to joint control over Sycom Fund. The Tribunal accepted the Commission's findings that the parties' activities overlapped only in certain Grade A office property markets, and that the merged entity's market shares in these markets (Sandton and Environs node: 4.78%, Bryanston node: 7.4%, Greater Woodmead node: 14.66%) were sufficiently low so as not to raise competition concerns. Furthermore, Acucap's provision of property and asset management services was limited to its own properties, and Sycom's provision to third parties did not create a competitive overlap. The Tribunal concluded that the transaction would not substantially prevent or lessen competition and that there were no significant public interest issues. Accordingly, the merger was approved.
Obiter and limits
- The Tribunal noted that Acucap had acquired an 18% stake in the Sycom Fund prior to the transaction, which was not disclosed to the Commission during its investigation.
- The regulatory environment governing property trusts results in separation between ownership and control, making control over the managing company equivalent to control over the underlying fund.
Court disposition
Merger approved without conditions.
- The acquisition by Acucap Properties Ltd of certain assets and shares in Sycom Fund from Parkdev (Pty) Ltd is approved.
- No conditions are imposed on the approval of the merger.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION TRIBUNAL OF
SOUTH AFRICA
Case No: 79/LM/Jul08
In the matter between:
Acucap Properties Ltd Acquiring Firm
And
Parkdev (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member), N Manoim (Tribunal
Member) and Y Carrim (Tribunal Member)
Heard on : 10 September 2008
Order issued on : 17 September 2008
Reasons issued on : 6 October 2008
Reasons for Decision
Approval
On 17 September 2008, the Tribunal approved the acquisition by Acucap Properties Ltd (“Acucap”) of certain assets and shares in Sycom Fund
from Parkdev Pty Ltd (“Parkdev”). The reasons follow below.
The Transaction
The proposed transaction comprises a series of inter-related steps whereby Acucap will acquire certain interests and assets in Sycom
Fund from Parkdev.1 The various steps are:
An asset management transaction whereby Acucap is acquiring 50% of the rights and obligations in Sycom Property Fund Managers (“SPFM”),
A property management transaction whereby Acucap is acquiring all the properties owned or co-owned by the Sycom Property Fund,
The sale of shares transaction whereby Acucap is acquiring 50% of the issued share capital in SPFM.
Following the implementation of the proposed transaction Acucap will acquire sole control of the property management business of the Sycom Fund. Acucap and Parkdev will also share joint control of the asset management business as well as of SPFM. Going forward SPFM will contract certain of the asset management functions to Parkdev and the property management to Acucap. (See annexure A for a diagram of the structure post the transaction.)
During the hearing the merging parties acknowledged that whoever controls SPFM also controls the Sycom Fund because there is a separation between ownership and control due to the regulatory environment within which they function.2 Thus, as a result of the purchase of the shares in SPFM Acucap will acquire the ability to exercise joint control over the Sycom Property Fund.3
Acucap is a property loan stock company listed on the JSE Securities Exchange. Acucap is not controlled by any single firm. Its largest shareholder is the Public Investment Corporation.
The primary target firms are all controlled by Parkdev. Parkdev in turn is controlled by Village Trust.
Rationale for the transaction
The Boards of Acucap and Sycom have identified certain synergies between the two funds that would, by merging the two funds, realize substantial
benefits to unitholders.
The relevant market and the impact on competition
Acucap owns retail properties, office buildings and industrial properties in Gauteng, Western Cape, Eastern Cape and Kwazulu Natal provinces. Sycom owns retail and office properties in Gauteng and the Western Cape province. The Commission found that the parties’ activities overlapped with regard to grade A office properties in the Sandton and Environs node, the Bryanston node and the Greater Woodmead node.
Both parties also offer property and asset management services4,
however, Acucap only offers its property and asset management services in-house while Sycom, in addition to its own properties,
also provide these services to third parties. In light of the fact that Acucap does not offer these services to third parties, the Commission did not regarded them as competitors in this market.5 We agree.
The merged entity’s market share in the Grade A office property market will be:
Sandton and Environs node 4.78%
Bryanston node 7.4%
Greater Woodmead node 14.66%
In light of the fact that the merged entity’s market shares remain low in the overlapping Grade A property markets we find that the transaction is unlikely to substantially prevent or lessen competition in any of the relevant markets.
CONCLUSION
There are no significant public interest issues and we accordingly approve the transaction.
______ 6 October 2008
N Manoim Date
D Lewis and Y Carrim concurring
Tribunal Researcher: R Badenhorst
For the merging parties: Vani Chetty
For the Commission: Xolela Nokela
Annexure A
P
SYCOM PROPERTY
FUND MANAGERS LIMITED
OST THE TRANSACTION
50%
50%
18.3%
ACUCAP
PROPERTIES LIMITED
Subsidiaries
Acucap Investments (Pty) Ltd
Acucap Investments 2 (Pty) Ltd
Acucap Investments 3 (Pty) Ltd
Acucap Investments 4 (Pty) Ltd
Intabrink Investments (Pty) Ltd
Illovo Boulevard Piazzas (Pty) Ltd
Atlas Properties Limited
Advent Properties (Pty) Ltd
Atlas Property Developments (Pty) Ltd
Atlas Management Services (Pty) Ltd
PROPERTY
PORTFOLIO
- Retail Assets R3.5b
- Offices R1.5b
- Total R5b
SYCOM PROPERTY
FUND
PROPERTY
PORTFOLIO
- Retail Assets R2.6b
- Offices R1.8b
- Total R4.4b
100% Fund Manager in terms of Trust Deed
PARKDEV (PTY)
LIMITED
50% Undivided Share in Asset Management Agreement
50% Undivided Share in Asset Management Agreement
100%
100%
100% Property Management Agreement
1 Acucap also has an 18% stake in the Sycom Fund which was acquired during the first quarter of 2008. This was not disclosed to the Commission during its investigation into the transaction. Note that in paragraphs 3 and 4 below we discuss the fact that due to the legislation governing property trusts the party that controls the managing company also controls the underlying fund.
2 See transcript page 8.
3 This change in control over Sycom Fund from single to joint control triggers the notification of the large merger.
4 Property management services concerns services such as collecting the rent, paying all bills and day to day maintenance of the property. Asset management services concerns financial functions on a fund level.
5 The merged entity’s market share in the asset management market will be 10.8% and the property management services market 7.1%.
6
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