Business Venture Investments No. 1697 (Pty) Ltd and Another v Menlyn Maine Investments Holdings (Pty) Ltd (018903) [2014] ZACT 61 (13 August 2014)
- Citation
- [2014] ZACT 61
- Status
- Order
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Yasmin Carrim, Medi Mokuena
- Case number
- 018903
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Yasmin Carrim, Medi Mokuena
- Case number
- 018903
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the acquisition by BVI and GEPF of minority shareholdings in Menlyn Maine, coupled with the proposed amendment to the Memorandum of Incorporation granting minority protection rights, resulted in joint control and rendered the transaction notifiable. The Commission's analysis showed a horizontal overlap in the market for rentable Grade P office property, with a post-merger market share of approximately 42.4%. However, the presence of credible competitors with development rights in the area was sufficient to constrain any potential exercise of market power. The transaction raised no adverse public interest concerns, including no negative impact on employment. Accordingly, the Tribunal approved the merger unconditionally.
Court disposition
The proposed merger is approved unconditionally.
Orders
- The acquisition by Business Venture Investments No. 1697 (Pty) Ltd and the Government Employees Pension Fund of Menlyn Maine Investments Holdings (Pty) Ltd is approved without conditions.
02
Material facts
Parties
Business Venture Investments No. 1697 (Pty) Ltd
Applicant Counsel: Ahmore Burger-SmidtGovernment Employees Pension Fund
Applicant Counsel: Ahmore Burger-SmidtMenlyn Maine Investments Holdings (Pty) Ltd
RespondentAmounts and remedies
- Post Merger Market Share for Future Rentable Grade P Office Developments in Menlyn Maine Precinct and Surroundings: 42.4
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the acquisition by BVI and GEPF of Menlyn Maine Investments Holdings (Pty) Ltd constitutes a notifiable merger under the Competition Act.
- 02
Whether the proposed transaction is likely to substantially prevent or lessen competition in the market for rentable Grade P office property within the relevant geographic area.
- 03
Whether the transaction raises any public interest concerns, including adverse effects on employment.
Party arguments
- Applicant
- The applicants argued that their acquisition of minority shareholdings in Menlyn Maine did not initially confer control, and thus was not notifiable. However, with the proposed amendment to the Memorandum of Incorporation, minority protection rights would grant them veto powers over certain resolutions, resulting in joint control. The rationale for the transaction is to protect their interests and participate in strategic decision-making within Menlyn Maine.
- Respondent
- Menlyn Maine submitted that the support and cooperation of BVI and GEPF are necessary for its strategic positioning and future growth. The Commission identified a horizontal overlap in the market for rentable Grade P office property but found that, despite a high post-merger market share, credible competitors with development rights in the area would constrain any exercise of market power. The transaction would not adversely affect employment or raise other public interest concerns.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A transaction is notifiable under the Competition Act if it results in joint control through minority protection rights that confer veto powers over strategic decisions.
- 02
Competition Act, 89 of 1998
A merger may be approved if it is unlikely to substantially prevent or lessen competition, considering both current and potential future market shares and the presence of credible competitors.
- 03
Competition Act, 89 of 1998
Public interest considerations, such as effects on employment, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the acquisition by BVI and GEPF of minority shareholdings in Menlyn Maine, coupled with the proposed amendment to the Memorandum of Incorporation granting minority protection rights, resulted in joint control and rendered the transaction notifiable. The Commission's analysis showed a horizontal overlap in the market for rentable Grade P office property, with a post-merger market share of approximately 42.4%. However, the presence of credible competitors with development rights in the area was sufficient to constrain any potential exercise of market power. The transaction raised no adverse public interest concerns, including no negative impact on employment. Accordingly, the Tribunal approved the merger unconditionally.
Obiter and limits
- The Tribunal noted that the initial acquisition was not notified because minority shareholdings did not confer control, but amendments to the MOI changed the control structure.
- The presence of competitors owning 57% of the market and holding development rights was a significant factor in the competition analysis.
- No retrenchments or adverse employment effects would result from the transaction, and no other public interest concerns were identified.
Court disposition
The proposed merger is approved unconditionally.
- The acquisition by Business Venture Investments No. 1697 (Pty) Ltd and the Government Employees Pension Fund of Menlyn Maine Investments Holdings (Pty) Ltd is approved without conditions.
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
Order
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018903
In the matter between:
Business Venture Investments No. 1697.................................................................................Acquiring Firms
(Pty) Ltd and Government Employees
Pension Fund
And
Menlyn Maine Investment Holdings (Pty) Ltd..............................................................................Target Firm
Panel : Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on: 13 August 2014
Order issued on: 13 August 2014
Reasons issued on : 10 September 2014
Reasons for Decision
Approval
1. On 13 August 2014 the Competition Tribunal (the “Tribunal”) unconditionally approved an acquisition by Business Venture Investments No. 1697 (Pty) Ltd (“BVI”) and the Government Employees Pension Fund (“GEPF”) of Menlyn Maine Investment Holdings (Pty) Ltd (“Menlyn Maine”).
2. The reasons for the approval of the proposed transaction follow.
3. The primary acquiring firms are BIV and the GEPF. BVI is 100% controlled Billy Lesedi Masetlha (“Masetlha”). BVI does not directly or indirectly control any firms. The GEPF is controlled by the GEPF Board of Trustees comprising of 16 Trustees appointed in terms section 6 of the Government Employee Pension Law of 1996. The GEPF controls the following firms: ADR International Airports South Africa (Pty) Ltd (“ADR”), Pareto Ltd (“Pareto”), Business Venture Investments (Pty) Ltd (“Business Venture”), Community Property Fund (“CPF”), CBS Property Portfolio (Pty) Ltd (“CBS”) and Lexshell 44 General Trading (Pty) Ltd (“Lexshell").
4. BVI is newly incorporated and has not traded before and therefore does not provide any products or services. The GEPF’s core business is to manage and administer pension funds and other benefits for government employees thorough investments in four classes of assets, i.e. equities, property, fixed income and Isibaya fund.
5. Relevant for this transaction is the GEPF’s ownership of a Grade P office property, namely Riverwalk Office Park, situated in Ashlea Gardens, Pretoria.1
6. The primary target firm is Menlyn Maine, a firm incorporated in terms of the Laws of the Republic of South Africa. Menlyn Maine is jointly controlled by African Spirit Trading 309 (Pty) Ltd (“African Spirit 309”) and African Spirit Trading 306 (Pty) Ltd (“African Spirit 306”). African Spirit 309 and African Spirit 306 each have 28.17% shareholding in Menlyn Maine. The remaining non-controlling shares are held by BVI (25.01 %) and the GEPF (18.65%). Menlyn Maine directly controls Applewood Trading 80 (Pty) Ltd and Business Venture Investment Holdings 1565 (Pty) Ltd.
7. Menlyn Maine is a firm which acquires, develops and/or co-deve!ops properties in South Africa. It owns half of an office block known as the Pegasus office block which is currently under construction. The Pegasus office block is situated in Menlyn, Pretoria and will constitute rentable Grade P office property. In addition, Menlyn Maine is the developer of a mixed-use property development known as Menlyn Maine Precinct. Menlyn Maine Precinct is located in Waterkloof, Pretoria, and will consist of residential, retail and offices premises as well as restaurants, a gym, spa, hotel and medical facilities.
Proposed transaction and rationale
8. Prior to February 2014, African Spirit 309 and African Spirit 306 jointly controlled Menlyn Maine, with each holding 50% shareholding. In February 2014 BVl and the GEPF subscribed for 25.01% and 18.65% shareholding respectively in Menlyn Maine. The shareholdings of the two African Spirit companies were diluted to the present 28.17% each. This acquisition was not notified at the time. The reason for not notifying the transaction according to the parties was that BVl’s 25.01% and the GEPF’s 18.65% shareholding in Menlyn Maine did not confer any form of control in them over Menlyn Maine.
9. In this proposed transaction there is no change to the respective shareholdings in Menlyn Maine, they remain as they were in February 2014. The reason the transaction is now considered notifiable by the merging parties is that shareholders intend to amend the existing Memorandum of Incorporation (“MOI”) to afford BVl and the GEPF with certain minority protection rights in Menlyn Maine. These minority protection rights give each shareholder a veto over certain resolutions and hence each could be considered a joint controller. Hence, post-merger, Menlyn Maine will be jointly controlled by African Spirit 309, African Spirit 306, BVl and the GEPF.
10.The rationale for BVI and the GEPF is that they want to protect their respective interests and ensure that they are part of the strategic decision making within Menlyn Maine.
11. Menlyn Maine submitted that it requires the support and close cooperation of both BVI and the GEPF to strategically position it “going forward and to ensure its future growth and stability.
Competition Analysis
12.The Commission identified a horizontal overlap between the activities of the merging parties in respect of the market for rentable Grade P office property. In relation to the relevant geographic market, the Commission considered the competitive effects of this transaction within a 5 kilometer radius from Menlyn Maine. This area includes the following nodes: Menlyn, Faerie Glen, Ashlea Gardens, Lynnwood, Menlo Park and Hazel Wood nodes.
13. In relation to market shares, the Commission not only considered the merging parties’ current market shares, but also took into account potential office property developments that would commence in the future at Menlyn Maine Precinct. The Commission estimated that the merging parties’ post-merger market shares for future rentable Grade P office developments in the Menlyn Maine Precinct and surroundings are approximately 42.4%, although the accretion is insignificant. The Commission however found that the merger is unlikely to substantially prevent or lessen competition in the market for rentable Grade P office in the future because several of th'ê competitors own land in the same area and have developments rights for office property. Thus even though the present market share is high, the potential for future development by credible competitors appears timely, likely and sufficient to constrain any post-merger exercise of market power.2
Public interest
14.The merging parties confirmed that the proposed transaction will have no adverse effect on employment and will not result in any retrenchments in South Africa.3 The proposed transaction raises no other public interest concerns.
Conclusion
15. For the reasons mentioned above, we approve the proposed transaction unconditionally.
10 September 2014
Date
Mr. Norman Manoim
Ms. Yasmin Carrim and Mrs Medi Mokuena concurring
Tribunal researcher: Ipeleng Selaledi
For the merging parties: Ahmore Burger-Smidt of Werksmans
For the Commission: Grace Mohamed
1 For a list of all the properties owned by the GEPF see Annexure CR1.
2About 57% of the market belongs to competitors such as Neo Trend, Eris Property Group and Metro Investments who own these rights.
3 See merger record, pages 11. Also see paragraph 8 of the Commission’s merger report.
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