South Africa Judgment

Competition Tribunal

SA Corporate Real Estate Fund and Buffcol Portfolio (78/LM/Jul07) [2007] ZACT 70 (20 September 2007)

Competition Law Commercial and Corporate Land and Property Merger Control Office Property Market Public Interest Market Share Analysis

Citation: [2007] ZACT 70
Status: Judgment
Jurisdiction: South Africa
Court: Competition Tribunal
Panel: D Lewis, N Manoim, Y Carrim
Case number: 78/LM/Jul07

More details

Court: Competition Tribunal
Panel: D Lewis, N Manoim, Y Carrim
Case number: 78/LM/Jul07

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Professional case brief

Research organized from the available case record

Source document

Holding and result

The Tribunal found that the proposed transaction resulted in an overlap in grade B and C office properties in Pinetown and Pietermaritzburg, as well as light industrial properties in Jet Park, Boksburg, Isando, and Springfield. However, post-merger, the combined entity would not have a market share exceeding 5% in any of the identified product markets. The Tribunal concluded that the transaction was unlikely to substantially prevent or lessen competition in any relevant market. Furthermore, there were no significant public interest issues identified. Accordingly, the Tribunal approved the transaction.

Court disposition

The merger is approved without conditions.

Orders

The acquisition by SA Corporate Real Estate Fund of the Buffcol Portfolio is approved.
No conditions are attached to the approval.

Material facts

Parties

SA Corporate Real Estate Fund

Applicant Counsel: Jowell Glyn & Marais Inc

Buffcol Portfolio

Respondent Counsel: Jowell Glyn & Marais Inc

Amounts and remedies

SA Corporate Real Estate Fund Asset Value Post Transaction: ZAR 7,800,000,000
SA Corporate Real Estate Fund Asset Value Pre Transaction: ZAR 6,800,000,000
Public Investment Corporation Shareholding (%): ZAR 27.99
Old Mutual Investment Group Shareholding (%): ZAR 19.5
Whirlprops (pty) Ltd Shareholding (%): ZAR 12.5
Marriott Asset Management Shareholding (%): ZAR 8.54

Procedural history

Posture

Merger Control / Approval

Questions and positions

Legal issues

01
Whether the proposed acquisition would substantially prevent or lessen competition in the relevant property markets.
02
Whether there are any significant public interest concerns arising from the transaction.

Party arguments

Applicant: The applicant argued that the acquisition would enhance the critical mass and diversification of its property portfolio, increasing its asset value from R6.8 billion to over R7.8 billion. It contended that the transaction would not result in a significant increase in market share in any relevant product market and would not negatively impact competition.
Respondent: The respondent, Buffcol Portfolio, sought to realise its investment and did not oppose the transaction. The Competition Commission, representing the respondent's interests, submitted that the merged entity would not hold more than 5% market share in any identified market and that no substantial lessening of competition or public interest concerns would arise.

Court’s reasoning

Legal principles

01
Competition Act, 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, 89 of 1998

Public interest considerations must be assessed in merger transactions, including the effect on employment and the ability of small businesses to compete.

Ratio, limits and disposition

Ratio decidendi

The Tribunal found that the proposed transaction resulted in an overlap in grade B and C office properties in Pinetown and Pietermaritzburg, as well as light industrial properties in Jet Park, Boksburg, Isando, and Springfield. However, post-merger, the combined entity would not have a market share exceeding 5% in any of the identified product markets. The Tribunal concluded that the transaction was unlikely to substantially prevent or lessen competition in any relevant market. Furthermore, there were no significant public interest issues identified. Accordingly, the Tribunal approved the transaction.

Obiter and limits

The Tribunal noted that the transaction would increase the asset value of SA Corporate Real Estate Fund's portfolio, enhancing its critical mass and diversification.
The Tribunal observed that Buffcol Portfolio's motivation was to realise its investment, which is a legitimate commercial rationale.

Court disposition

The merger is approved without conditions.

The acquisition by SA Corporate Real Estate Fund of the Buffcol Portfolio is approved.
No conditions are attached to the approval.

Source and reliance status

Competition Tribunal

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Source document

Competition Tribunal

Judgment

[2007] ZACT 70

COMPETITION

TRIBUNAL OF SOUTH AFRICA

Case No: 78/LM/Jul07

In the matter between:

SA Corporate Real Estate Fund Acquiring Firm

And

The Buffcol Portfolio Target Firm

Panel : D Lewis (Presiding Member), N Manoim (Tribunal

Member) and Y Carrim (Tribunal Member)

Heard on : 5 September 2007

Order issued on : 5 September 2007

Reasons issued on : 20 September 2007

Reasons for Decision

Approval

On 5 September 2007, the Tribunal approved the acquisition by SA Corporate Estate Fund of 38 properties owned by The Buffcol Portfolio. The reasons follow below.

The Transaction

This is a property transaction in terms of which SA Corporate Estate Fund (âSA Corpâ) intends to acquire all the properties within the Buffcol Portfolio. The Buffcol Portfolio, comprising of the Buffet Properties and Collins Properties, owns 38 properties in total which are located throughout South Africa. Post the transaction SA Corp will own and control the Buffcol Portfolio.

SA Corp is listed on the JSE Limited and is not controlled by any single shareholder. Its largest shareholders are:

Public Investment Corporation 27.99%

Old Mutual Investment Group 19.50%

Whirlprops (Pty) Ltd 12.50%

Marriott Asset Management 8.54%

Rationale for the transaction

Buffcol wishes to realise its investment. The transaction will enhance the critical mass and diversification of SA Corpâs portfolio.. The asset value of its portfolio will increase to more than R7.8 billion from the current level of R6.8 billion.

The relevant market and the impact on competition

The proposed transaction results in an overlap in respect of grade B and C office properties situated in Pinetown and Pietermaritzburg respectively and in light industrial properties situated in the Jet Park, Boksburg, Isando and Springfield nodes.

Post the transaction the merged entity will not have a market share of more than 5% in any of the product markets identified above. In light of this 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.

______ 20 September 2007

Y Carrim Date

D Lewis and Manoim concurring

Tribunal Researcher: R Badenhorst

For the merging parties: Jowell Glyn & Marais Inc

For the Commission: M Matsimela and Makgale Mohlala

Authorities

Authorities used by the court

Cases, legislation, regulations, and constitutional provisions identified in the available record.

Competition Act, 89 of 1998

Legislation

Legislation referenced in the available case record.

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