Luvon Investments (Pty) Ltd and Others v Investec Property Fund Limited and Others (LM149Jan20) [2020] ZACT 87 (20 March 2020)
- Citation
- [2020] ZACT 87
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Enver Daniels, Yasmin Carrim, Andreas Wessels
- Case number
- LM149Jan20
More details
- Court
- Competition Tribunal
- Panel
- Enver Daniels, Yasmin Carrim, Andreas Wessels
- Case number
- LM149Jan20
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that although there is a horizontal overlap in the business activities of the merging parties, there is no geographic overlap in Musina, as neither Luvon Investments nor Changing Tides 91 own properties in that area. The closest property owned by either party is 138 km away. The Commission concluded that the transaction is unlikely to substantially prevent or lessen competition in any relevant market. Furthermore, the merging parties confirmed that there would be no adverse effect on employment or other public interest concerns. Accordingly, the Tribunal approved the transaction unconditionally.
Court disposition
The proposed transaction was approved unconditionally.
Orders
- The merger between Luvon Investments (Pty) Ltd, Changing Tides 91 (Pty) Ltd, and Investec Property Fund Limited in respect of Musina Mall & Great North Plaza is approved without conditions.
02
Material facts
Parties
Luvon Investments (Pty) Ltd
Applicant Counsel: Ms Misha van NiekerkChanging Tides 91 (Pty) Ltd
Applicant Counsel: Ms Misha van NiekerkInvestec Property Fund Limited
RespondentAmounts and remedies
- Shareholding Acquired by Luvon Investments: ZAR 16.7
- Shareholding Acquired by Changing Tides 91: ZAR 50
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed transaction will substantially prevent or lessen competition in any relevant market in South Africa.
- 02
Whether the transaction raises any public interest concerns, including adverse effects on employment.
Party arguments
- Applicant
- The applicants argued that the acquisition of additional shares in the Target Properties is commercially justified based on the value and risk profile of the enterprise and geographic area. They submitted that the transaction would not result in any anti-competitive effects or adverse public interest consequences.
- Respondent
- Investec Property Fund Limited submitted that the transaction aligns with its objective of value creation through efficient recycling of capital into platforms that generate superior risk-adjusted returns. The Commission argued that there is no geographic overlap and that the transaction is unlikely to substantially prevent or lessen competition.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, No. 89 of 1998
The Tribunal must consider public interest factors, including the effect on employment, when assessing a merger.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that although there is a horizontal overlap in the business activities of the merging parties, there is no geographic overlap in Musina, as neither Luvon Investments nor Changing Tides 91 own properties in that area. The closest property owned by either party is 138 km away. The Commission concluded that the transaction is unlikely to substantially prevent or lessen competition in any relevant market. Furthermore, the merging parties confirmed that there would be no adverse effect on employment or other public interest concerns. Accordingly, the Tribunal approved the transaction unconditionally.
Obiter and limits
- The Tribunal noted that the efficient recycling of capital is a legitimate commercial objective for property investment firms.
- The absence of geographic overlap was a decisive factor in the competition assessment.
Court disposition
The proposed transaction was approved unconditionally.
- The merger between Luvon Investments (Pty) Ltd, Changing Tides 91 (Pty) Ltd, and Investec Property Fund Limited in respect of Musina Mall & Great North Plaza 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
Judgment
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM149Jan20
In the matter between:
Luvon Investments (Pty) Ltd and Changing Primary Acquiring Firm(s)
Tides 91 (Pty) Ltd
And
Investec Property Fund Limited in respect of the Primary Properties
Target Properties Musina Mall & Great North Plaza.
Panel : Enver Daniels (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 04 March 2020
Order Issued on : 04 March 2020
Reasons Issued on : 20 March 2020
Reasons for Decision
Approval
[1] On 04 March 2020, the Competition Tribunal (“Tribunal”) unconditionally approved the transaction involving Luvon Investments (Pty) Ltd and Changing Tides 91 (Pty) Ltd and Investec Property Fund Limited in respect of the Target Properties Musina Mall & Great North Plaza.
[2] The reasons for approving the proposed transaction follow.
Parties to the proposed transaction
Primary acquiring firms
[3] The primary acquiring firms are Luvon Investments (Pty) Ltd (Luvon) and Changing Tides 91 (Pty) Ltd (Changing Tides 91).
[4] Luvon is a property investment and development company with a diversified portfolio of commercial and retail assets throughout South Africa.
[5] Luvon is controlled by East &West Investments (Pty) Ltd and forms part of the Moolman Group, which is involved in the management and letting of commercial and retail properties and the development of such properties.
[6] Changing Tides 91 is a property holding company which forms part of the group controlled by Flanagan & Gerard Group (Pty) Ltd (the Flanagan & Gerard Group).
[7] The Flanagan & Gerard Group controls a diversified retail property portfolio (directly or indirectly through its subsidiaries) situated in Gauteng, Mpumalanga and KwaZulu-Natal.
Primary Target Properties
[8] The primary Target Properties are Musina Mall & Great North Plaza. The Target Properties are small regional shopping centres situated in Musina Limpopo.
[9] The seller of the Target Properties is Investec Property Fund Limited. Investec Property Fund is a real estate investment trust, listed on the Johannesburg Stock Exchange. Investec Property Fund invests in a diversified portfolio of commercial, industrial and retail assets in major South African metropolitan areas.
Proposed transaction and rationale
[10] Prior to the approval of this transaction, Investec Property Fund and Luvon Investment each held 66.7% and 33.3% shareholding in the Target Properties.
[11] In terms of the proposed transaction Investec Property Fund intends to sell its 66.7% interest in the Target Properties to Luvon Investments and Changing Tides 91 who will acquire 16.7% and 50% respectively, in the Target Properties.
[12] Upon the implementation of the proposed transaction, Luvon Investments and Changing Tides 91 will each have 50% shareholding in the Target Property.
[13] The Moolman Group submitted that following a consideration of the value of the proposed transaction as well as the risk profile of the letting enterprise and the geographic area, it elected to acquire an additional 16.7% share in order to have a total interest of 50%.
[15] Investec Property Fund submitted that the proposed transaction is line with its stated objective of value creation through the efficient recycling of capital into platforms which generate superior risk adjusted returns.
Impact on competition
[16] The Commission considered the activities of the merging parties and found that there is a horizontal overlap in their business activities in that they are all involved in the holding and management of rentable retail properties.
[17] In relation to the geographic overlap, the Commission found that the proposed transaction does not result in a geographic overlap because Changing Tides 91 does not own properties in Musina. Luvon Investments also does not own properties in Musina. The Commission submits that the closest retail property from the Target Properties in which either (or both) Luvon Investments and Changing Tides 91 hold an interest in, is Thavhani Mall which is located approximately 138 km from the Target Property.
[18] Given the above, the Commission concluded that the proposed transaction is unlikely to substantially prevent or lessen
competition in any relevant market in South Africa.
Public interest
[19] The merging parties confirmed that the proposed transaction will have no adverse effect on employment in South Africa and raises no other public interest concerns.[1]
Conclusion
[20] In light of the above, we concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no public interest issues arise from the proposed transaction. Accordingly, we approved the proposed transaction unconditionally.
Signed by: Enver Daniels Signed at: 2020-04-22 10:54:22
Reason: Witnessing Enver
DATE: 20 March 2020
Mr Enver Daniels
Ms Yasmin Carrim and Mr Andreas Wessels concurring
Tribunal Case Manager: Ms Busisiwe Masina
For the merging parties: Ms Misha van Niekerk of Adams
& Adams Attorneys
For the Commission : Ms Sewela Moshoma
[1] Merger Record, pages 14.
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