Airports Company South Africa and Denel (Pty) Ltd & Another (55/LM/May07) [2007] ZACT 62 (11 September 2007)
The Tribunal found that although the merged entity would initially hold a significant market share in industrial properties (31%) and office properties (59%) in the Kempton Park node adjacent to OR Tambo International Airport, these shares would decrease substantially after the demolition of buildings and expiry of...
Source-derived case information.
- Citation
- [2007] ZACT 62
- Parties
- Applicant: Airports Company South Africa Ltd; Respondent: Denel (Pty) Ltd; Respondent: Aero Eiendomme (Pty) Ltd
- Court
- Competition Tribunal
- Jurisdiction
- South Africa
- Case Number
- 55/LM/May07
- Procedural Posture
- Merger Approval / Final Determination
- Outcome
- Merger approved without conditions.
- Judges
- D Lewis, Y Carrim, M Mokuena
- Legal Topics
- Merger Control, Industrial Property Market Share, Public Interest Assessment
Source-derived case record
Summary, issues, holding and outcome
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Parties
Airports Company South Africa Ltd
Applicant
Denel (Pty) Ltd
Respondent
Aero Eiendomme (Pty) Ltd
Respondent
Procedural Posture
Merger Approval / Final Determination
Legal Issues
- 1 Whether the proposed merger would substantially prevent or lessen competition in the relevant industrial and office property markets adjacent to OR Tambo International Airport.
- 2 Whether there are any significant public interest concerns arising from the transaction.
Ratio Decidendi
The Tribunal found that although the merged entity would initially hold a significant market share in industrial properties (31%) and office properties (59%) in the Kempton Park node adjacent to OR Tambo International Airport, these shares would decrease substantially after the demolition of buildings and expiry of the lease-back arrangement. Specifically, the industrial property market share would drop to 16%, and the office property market share would fall to zero. The Tribunal concluded that the transaction would not substantially prevent or lessen competition in the relevant markets. Furthermore, no significant public interest issues were identified. Accordingly, the merger was approved.
Court Disposition
Merger approved without conditions.
Orders
- The merger between Airports Company South Africa Ltd and Denel (Pty) Ltd and Aero Eiendomme (Pty) Ltd is approved.
- No conditions are attached to the approval.
Full Case Text
Judgment text and source record
37 paragraphs
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 55/LM/May07
In the matter between:
Airports Company South Africa Acquiring Firm
And
Denel (Pty) Ltd Target Firms
Aero Eiendomme (Pty) Ltd
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal
Member) and M Mokuena (Tribunal Member)
Heard on : 20 July 2007
Order issued on : 20 July 2007
Reasons issued on : 11 September 2007
Reasons for Decision
Approval
On 20 July 2007, the Tribunal approved the merger between Airports Company South Africa Ltd and Denel (Pty) Ltd and Aero Eiendomme (Pty) Ltd. The reasons follow below.
The Transaction
The transaction involves the disposal by Denel (Pty) Ltd (âDenelâ) and Aero Eiendomme (Pty) Ltd (âAeroâ) of certain properties located adjacent the O.R. Tambo International Airport to Airports Company South Africa (Ltd) (âACSAâ).1
The primary acquiring firm is ACSA which is controlled by The Minister of Transport of the Republic of South Africa (âthe Stateâ) holding 74,6% of the shares in ACSA and ADRIASA holding 20% of the shares in ACSA. ADRIASA is 100% controlled by the Public Investment Corporation Ltd (âPICâ). ACSA has exclusive control over the assets and liabilities of nine airports in South Africa, one of which is the OR Tambo International Airport.
The primary target firms are Denel and its wholly owned subsidiary Aero. Denel is a private company, incorporated in terms of the Companies Act 61 of 1973 and the Government is the sole shareholder. Denel is managed by a Board of Directors, appointed by the Minister of Public Enterprises and it is involved in the aviation and military industries.
The Government controls both the acquiring and target firms.
Rationale for the transaction
ACSA requires land, inter alia, for the construction of a new runway, for the provision of airline maintenance and support facilities and for other aviation related commercial development whilst the transaction will strengthen Denelâs financial liquidity.
Subsequent to this transaction ACSA will lease the properties back to Denel for a period of 5 years after which it will demolish most the office properties for purposes of constructing a runway and other related airport infrastructure.
The relevant market and the impact on competition
The overlap between the partiesâ property portfolios are in Industrial properties and Grade B and C Office Space properties in the Kempton Park node, specifically the area adjacent to OR Tambo Airport.
Although the merged firm will initially hold a market share of 31%, i.e. 376 032 mï, in the industrial properties market immediately after the transaction this will decrease to only 16%, i.e. 87 860mï, when the buildings are demolished to build the new runway. With regard to the office properties none will remain and the market share will thus drop from 59% to zero after the lease agreement with Denel expires in 5 years.
In light of the above we find that the transaction would not substantially prevent or lessen competition the relevant markets.
CONCLUSION
There are no significant public interest issues and we accordingly approve the transaction.
____________________ 11September 2007
D Lewis Date
Y Carrim and M Mokuena concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: Hofmeyr Herbstein & Gihwala Inc
For the Commission: Leonard Lamola (Mergers & Acquisitions)
1 The properties are Portions 139, 57, 131, 253, 254, 255 and part of portions 140 and 56
3