TP Hentiq 6159 (Pty) Ltd v Xeedan Property Portfolio (45/LM/Jun11) [2011] ZACT 75 (3 October 2011)
- Citation
- [2011] ZACT 75
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Andreas Wessels, Yasmin Carrim
- Case number
- 45/LM/Jun11
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Andreas Wessels, Yasmin Carrim
- Case number
- 45/LM/Jun11
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 not substantially prevent or lessen competition in the relevant property market. The only relevant overlap was in Grade A office space in Sandton and Environs, where the post-merger market share was low and the market remained competitive with many alternative providers. Customers retained significant countervailing power, being able to negotiate rents and switch offices easily. No public interest concerns were identified. Accordingly, the merger was approved unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed transaction is approved without conditions.
02
Material facts
Parties
TP Hentiq 6159 (Pty) Ltd
Applicant Counsel: Werksmans AttorneysXeedan Property Portfolio
Respondent Counsel: Werksmans AttorneysAmounts and remedies
- Post Merger Combined Market Share (grade a and B Office Space): 3.98
- Post Merger Combined Market Share (grade a Office Space Only): 1.22
03
Procedural history
Posture
Merger Application / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed property merger would substantially prevent or lessen competition in the relevant property market.
- 02
Whether the transaction raises any public interest concerns.
Party arguments
- Applicant
- The merging parties argued that the only relevant market overlap is in Grade A office space in Sandton and Environs, as the Wynberg property had already been sold to third parties. They submitted that the post-merger combined market share is low—3.98% for Grade A and B, and only 1.22% for Grade A office space. They further contended that the market is competitive, with many alternative providers and customers possessing countervailing power to negotiate rents and switch offices easily, eliminating any competition concerns.
- Respondent
- The Competition Commission found horizontal product and geographic overlaps in rentable industrial and office space but accepted the merging parties' submission that the Wynberg node was no longer relevant. The Commission calculated the post-merger market share at 3.98% and noted the presence of many competitors and customer countervailing power, concluding that the transaction would not substantially 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
Public interest considerations must be assessed in merger proceedings, but only if the transaction raises such issues.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in the relevant property market. The only relevant overlap was in Grade A office space in Sandton and Environs, where the post-merger market share was low and the market remained competitive with many alternative providers. Customers retained significant countervailing power, being able to negotiate rents and switch offices easily. No public interest concerns were identified. Accordingly, the merger was approved unconditionally.
Obiter and limits
- The Tribunal noted that the Wynberg node was excluded from the competition assessment as the property had already been sold to third parties.
- The presence of numerous competitors and customer countervailing power further mitigates any potential competition concerns.
Court disposition
Merger approved unconditionally.
- The proposed transaction 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: 45/LM/Jun11
In the matter between:
TP Hentiq 6159 (Pty) Ltd …................................................................................Acquiring Firm
And
Xeedan Property Portfolio …..................................................................................Target Firm
Panel : Norman Manoim (Presiding Member) Andreas Wessels (Tribunal Member) Yasmin Carrim (Tribunal Member)
Heard on : 07/09/2011
Order issued on : 07/09/2011
Reasons issued on : 03/10/2011
Reasons for Decision
APPROVAL
On 7 September 2011 the Competition Tribunal (“Tribunal”) unconditionally approved the proposed transaction involving TP Hentiq and Xeedan Property Portfolio. The reasons for approval of the proposed transaction follow below.
THE
TRANSACTION AND RATIONALE
The proposed deal is a property merger in terms of which TP Hentiq 6159 (Pty) Ltd (“TP Hentiq”) intends to acquire the Xeeden Property Portfolio (“Xeedan”), comprising of Xeeden Properties.
TP Hentiq, the acquirer in this transaction, was established for the purpose of this deal and is controlled by Investec Bank Limited
(“Investec”) which provides a range of financial products and services solutions, including properties. Xeeden is a property portfolio comprising residential, vacant land, commercial office, as well as golf estate, agriculture/farm and industrial
properties.
The rationale for the proposed transaction is essentially commercially driven as it arises from financial transactions between the merging parties in terms of which Investec advanced monies to Xeedan in relation to Xeeden property portfolio and acquired security rights in respect of the Xeedan property portfolio. Xeeden fell into default with the repayment obligation and Investec exercised its security rights in respect of the Xeeden properties so that it can sell these properties to discharge the debts due to it.
Post merger, Hentiq will take transfer of the Xeedan property portfolio and retain ownership thereof for the purpose of later selling the properties in order to recover the indebtedness due to it.
COMPETITION
ASSESSMENT
The Commission in its assessment of the proposed transaction found that the proposed transaction gives rise to horizontal product and geographic overlaps in rentable light or heavy industrial space in Wynberg node and grade A office space in Sandton and Environs node. However at the hearing the merging parties submitted that the Wynberg Property space has since been sold to third parties, which means that there is no overlap in that market. The Wynberg node therefore no longer becomes relevant for the purpose of competition assessment in this proposed deal, and the relevant market is the Grade A office Space in Sandon and Environs node.
There are no competition concerns in the relevant market as the post merger combined market share of the merging parties in this property space is low. The Commission calculated the post merger combined market share in this market to be 3.98%, whereas the merging parties submitted that the post merger combined market share in this market is 3.98% if you take into account grade A and B, but that if you only take into account grade A, the post merger combined market share drops to 1.22%.
In addition, it was submitted that there are a large number of competitors in this relevant property space, and that customers have countervailing power as they are able to negotiate the rent payable and are also able to switch to other office spaces within the nearest surroundings fairly easily, which further eliminates any potential competition concerns which may arise.
PUBLIC
INTEREST
This deal does not give rise to any public interest issues.
CONCLUSION
The proposed transaction is unlikely to substantially prevent or lessen competition in any property market, and is accordingly approved without conditions.
____ 03/10/2011
N Manoim Date
Y Carrim and A Wessels concurring
Tribunal Researcher: Londiwe Senona
For the merging parties: Werksmans Attorneys
For the Commission: Zanele Hadebe
3
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