Redefine Properties Limited v Cirano Investments 300 (Pty) Ltd (LM213Feb17) [2017] ZACT 32; [2017] 1 CPLR 369 (CT) (12 April 2017)
- Citation
- [2017] ZACT 32
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Andiswa Ndoni, Fiona Tregenna, Enver Daniels
- Case number
- LM213Feb17
More details
- Court
- Competition Tribunal
- Panel
- Andiswa Ndoni, Fiona Tregenna, Enver Daniels
- Case number
- LM213Feb17
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction would result in Redefine increasing its shareholding in the Galleria property to 62.31%, with further indirect control through Pivotal. The Commission identified horizontal overlaps in the provision of rentable office, retail, and residential property, but determined that post-transaction market shares would not confer market power sufficient to substantially prevent or lessen competition. The merged entity would continue to face competition from other property owners and new developments. The Tribunal accepted the Commission's analysis and concurred that the transaction would not adversely affect competition. Regarding public interest, the Tribunal found no adverse effect on employment or other grounds, as Cirano did not employ staff for the Target Property and no other concerns were identified. The transaction was therefore approved unconditionally.
Court disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Redefine Properties Limited and Cirano Investments 300 (Pty) Ltd in respect of a 17.31% undivided share in the Galleria property is approved without conditions.
02
Material facts
Parties
Redefine Properties Limited
Applicant Counsel: Vani ChettyCirano Investments 300 (Pty) Ltd
RespondentAmounts and remedies
- Undivided Share Acquired: 17.31
- Post Transaction Redefine Shareholding: 62.31
- Target Property Grade B Office Space (m2): 15,400
- Target Property Retail Space (m2): 1,017
- Post Development Grade P Office Space (m2): 52,000
- Post Development Retail Space (m2): 3,000
- Post Development Residential Space (m2): 25,000
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition of a 17.31% undivided share in the Galleria property by Redefine Properties Limited will substantially prevent or lessen competition in the relevant markets.
- 02
Whether the transaction raises any adverse public interest concerns, including effects on employment.
Party arguments
- Applicant
- Redefine Properties Limited argued that the acquisition aligns with its investment strategy and will not adversely affect competition, as the merged entity will continue to face competition from other property owners and new developments in the relevant markets. The transaction will not result in any adverse employment effects, as Cirano does not employ staff in respect of the Target Property.
- Respondent
- Cirano Investments 300 (Pty) Ltd submitted that the planned redevelopment of the Target Property does not fit within its investment strategy and supported the sale of its share to Redefine. No concerns were raised regarding competition or public interest.
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
Investec Property (Pty) Ltd and Spareprops (Pty) Ltd in respect of Erf 247 Rosebank Township (019307)
Market definition must consider product and geographic overlaps, and the ability of different grades of office property to constrain each other.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would result in Redefine increasing its shareholding in the Galleria property to 62.31%, with further indirect control through Pivotal. The Commission identified horizontal overlaps in the provision of rentable office, retail, and residential property, but determined that post-transaction market shares would not confer market power sufficient to substantially prevent or lessen competition. The merged entity would continue to face competition from other property owners and new developments. The Tribunal accepted the Commission's analysis and concurred that the transaction would not adversely affect competition. Regarding public interest, the Tribunal found no adverse effect on employment or other grounds, as Cirano did not employ staff for the Target Property and no other concerns were identified. The transaction was therefore approved unconditionally.
Obiter and limits
- The Tribunal noted that the final developed property would include residential spaces sold to the public, and thus did not assess competitive effects in the residential market further.
- The merging parties confirmed that no adverse employment effects would result from the transaction, as Cirano had no employees in respect of the Target Property.
Court disposition
The proposed transaction is approved unconditionally.
- The merger between Redefine Properties Limited and Cirano Investments 300 (Pty) Ltd in respect of a 17.31% undivided share in the Galleria property 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: LM213Feb17
In the matter between:
REDEFINE
PROPERTIES
LIMITED
Acquiring Firm
and
CIRANO INVESTMENTS 300 (PTY) LTD
in respect of a 17.31 percent undivided share in
the property letting enterprise known as the Galleria Target Firm
Panel
: Andiswa Ndoni (Presiding Member)
: Fiona Tregenna (Tribunal Member)
: Enver Daniels (Tribunal Member
Heard on
: 22 March 2017
Order Issued on
: 22 March 2017
Reasons Issued on : 12 April 2017
Reasons for Decision
Approval
[1] On 22 March 2017, the Competition Tribunal ("Tribunal") approved the proposed transaction between Redefine Properties Limited ("Redefine") and Cirano Investments 300 (Pty) Ltd ("Cirano") in respect of a 17.31% undivided share in the property letting enterprise known as the Galleria ("Target Property'').
[2] The reasons for approving the proposed transaction follow.
Parties to the Proposed Transaction
Primary Acquiring Firm
[3] The primary acquiring firm is Redefine, a company incorporated in accordance with the laws of the Republic of South Africa. It is listed on the Johannesburg Securities Exchange and is not controlled by any firm. Redefine controls a number of firms, including Pivotal Fund Limited ("Pivotal").
Primary Target Firm
[4] The business being acquired is a 17.31% undivided co-ownership share in a property called the Galleria ("the Target Property"). The Target Property is currently owned through a joint venture by Redefine (45%), Pivotal (20%), Cirano (25%) and Abshelf 04 (Pty) Ltd (10%).
Proposed Transaction and Rationale
[5] Redefine will increase its shareholding in the joint venture by acquiring an additional 17.31% interest from Cirano, thereby increasing it's shareholding to 62.31%.[1] Post-transaction Redefine will control the Target Property.[2]
[6] The Target Property represents a prime redevelopment site and the proposed transaction will allow Redefine to align with its investment strategy safcWAEGwgWRGrgHGrgWRGrgRGrgGWADFBADGBADFB. From Cirano's perspective, the planned redevelopment of the Target Property GrgRGrgGWADFBADGB does not fit within Cirano's investment strategy.
Relevant Market and Impact on Competition
[7] Redefine is a property investment company, which holds a diverse range of properties throughout South Africa. Relevant to the proposed transaction are the Acquiring Group's office, retail and residential properties located in Rosebank and surrounding areas.
[8] The Target Property is situated in Rosebank, Gauteng Province, and currently comprises of 15 400m2 Grade B Office space and 1 017m2 retail space. The Target Property, however, is in the process of being redeveloped and once development is complete the Target Property will comprise 52 000m2 of Grade P office space, 3 000m2 of retail space and 25 000m2 of residential space.
[9] As such the Commission found a horizontal overlap in the provision of rentable space in office property, the provision of rentable space in retail property, and the provision of rentable space in residential property. It analysed these as three separate markets.
[10] With regards to the market for the provision of rentable office property the Commission found a geographic overlap only in the provision of rentable Grade B office space but considered that Grade A and P office property within the Rosebank and adjacent nodes could constrain each other.[3]
[11] In the market for the provision of rentable office property the Commission found that, post-transaction, the merged entity will account for 23.34% of the Grade B office property market and 16.7% of the Grade P and A office property market. In the market for the provision of rentable retail property the merged entity will have a market share of 6.6% post-transaction. Furthermore, the merged entity will continue to face competition from other players, including Growthpoint and Liberty as well as other new developments and convenience centres.
[12] In terms of the market for the provision of rentable residential property, the rentable residential spaces in the final developed property will be sold to the general public and not kept by Redefine. As such the Commission did not assess the competitive effects in this market any further.
[13] The Commission is therefore of the view that the proposed transaction is unlikely to substantially prevent or lessen competition in any of the relevant markets. We concur with this finding.
Public Interest
[14] The merging parties confirmed that the proposed transaction will not result in any adverse effect on employment as Cirano does not currently employ any employees in respect of the Target Property.[4]
[15] The Commission was of the view that the proposed transaction is unlikely to raise concerns on any other public interest grounds.
Conclusion
[16] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market or raise any adverse public interest issues. Accordingly, we approve the proposed transaction unconditionally.
12 April 2017
DATE
_____
Ms Andiswa Ndoni
Prof Fiona Tregenna and Mr Enver Daniels concurring
Tribunal Researcher:
Hayley Lyle
For the merging parties:
Vani Chetty of Baker & McKenzie
For the Commission:
Zintle Siyo
[1] Pivotal intends acquiring the remaining 7.69% interest from Cirano, increasing it's shareholding to 27.69%.
[2] Post-transaction Redefine will essentially hold a 90% shareholding, directly through Redefine (62.31%) and indirectly through Pivotal (27.69%), in the Target Property.
[3] This is in accordance with the approach adopted by the Tribunal in Investec Property (Pty) Ltd and Spareprops (Pty) Ltd in respect of Erf 247 Rosebank Township (019307).
[4] Page 47 of the Merger Record.
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