SA Retail Properties (Pty) Ltd v AFHCO Holdings (018762) [2014] ZACT 11 (16 July 2014)
- Citation
- [2014] ZACT 11
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- A Roskam, I Valodia, F Tregenna
- Case number
- 018762
More details
- Court
- Competition Tribunal
- Panel
- A Roskam, I Valodia, F Tregenna
- Case number
- 018762
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 markets for B-Grade and C-Grade office space, rentable retail space in convenience centres, or rentable space in light industrial property. The geographic overlap between the parties' properties was limited or non-existent, and the post-merger market shares were not significant enough to raise competition concerns. Competitors would retain a dominant share of the relevant markets. Furthermore, no public interest issues arose from the transaction. Accordingly, the Tribunal approved the merger unconditionally.
Court disposition
Merger approved unconditionally.
Orders
- The proposed transaction is approved without conditions.
02
Material facts
Parties
SA Retail Properties (Pty) Ltd
Applicant Counsel: Desmond RudmanAFHCO Holdings
RespondentAmounts and remedies
- SA Corp Post Merger Market Share in Retail Property Within Johannesburg CBD Node: ZAR 16.6
- Competitors' Market Share in Retail Property Within Johannesburg CBD Node: ZAR 83.4
03
Procedural history
Posture
Merger Control / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger between SA Retail Properties and AFHCO Holdings is likely to substantially prevent or lessen competition in the relevant markets.
- 02
Whether any public interest concerns arise from the proposed transaction.
Party arguments
- Applicant
- SA Retail Properties argued that the acquisition would allow SA Corp to expand its portfolio and acquire an experienced management team in the residential sector. The transaction would also allow AFHCO shareholders to realise their investment at an appropriate time. The parties contended that the merger would not result in significant market concentration or anti-competitive effects.
- Respondent
- The Competition Commission submitted that although there is horizontal overlap in certain property markets, the geographic overlap is limited or non-existent. The post-merger market shares are not significant enough to raise competition concerns, and competitors would retain a substantial share of the market. No public interest issues were identified.
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 the relevant market.
- 02
Competition Commission Guidelines
The assessment of horizontal overlap requires consideration of geographic and product market definitions, as well as post-merger market shares.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in the markets for B-Grade and C-Grade office space, rentable retail space in convenience centres, or rentable space in light industrial property. The geographic overlap between the parties' properties was limited or non-existent, and the post-merger market shares were not significant enough to raise competition concerns. Competitors would retain a dominant share of the relevant markets. Furthermore, no public interest issues arose from the transaction. Accordingly, the Tribunal approved the merger unconditionally.
Obiter and limits
- The Tribunal noted that the acquisition would allow SA Corp to benefit from AFHCO's established management team in the residential sector.
- The transaction provides AFHCO shareholders with an opportunity to realise their investment at an appropriate time.
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: 018762
DATE: 16 JULY 2014
In the matter between:
SA RETAIL PROPERTIES (PTY) LTD......................Primary Acquiring Firm
And
AFHCO HOLDINGS.....................................................Primary Target Firm
Panel : Mr A Roskam (Presiding Member)
: Prof. I Valodia (Tribunal Member)
: Prof. F Tregenna (Tribunal Member)
Heard on : 18 June 2014
Order Issued on : 18 June 2014
Reasons Issued on : 16 July 2014
Reasons for Decision
Approval
[1] On 18 June 2014, The Competition Tribunal (‘Tribunal’') unconditionally approved the acquisition by SA Retail (Pty) Ltd (“SA Retail”) to acquire the entire issued share capital in AFHCO Holdings (Pty) Ltd (“AFHCO”). Post-
merger SA Corporate Real Estate Fund (“SA Corp”) will have sole indirect control over AFHCO.
[2] The reasons for approving the proposed transaction follow
Parties to the transaction
[3] The primary acquiring firm is SA Retail, a wholly owned subsidiary of SA Corporate Real Estate Fund Nominee (“SACN”). SACN is controlled by SA Corp, a company listed on the Johannesburg Securities Exchange. SA Carp’s shareholders with an interest of more than 5% include; Government Employment Pension Fund, Coronation Fund Managers and Stanlib Asset Management. SACN holds 100% shares in Blue Heron (Pty) Ltd, Dune Lark Investments, Erf 84-85-86 Shakes Head (Pty) Ltd, Wood Ibis Investments (Pty) Ltd, Grey Heron Investments (Pty) Ltd, Whirlprops 25 (Pty) Ltd, Rock Kestel Investments (Pty) Ltd and Stonedell Investments (Pty) Ltd. SACN holds 75% shares in Umlazi Mega City (Pty) Ltd,
[4] The primary target firms is AFHCO, its shareholders include; IDEA Managed Fund, Mr Wayne Plit and Ms Renney Plit. AFHCO holds 100% interest in various companies including AFHCO (Pty) Ltd (“AFHCO Sub”), AFHCO Property (Pty) Ltd, Urban Housing Finance (Pty) Ltd and Protea Glen Housing (Pty) Ltd. AFHCO Sub controls more than 11 companies.
Proposed Transaction
[5] SA Corp through its subsidiary SA Retail intends to acquire the entire issued share capital in AFHCO. Post-merger SA Corp will have sole Indirect control over AFHCO.
Rationale
[6] The proposed transaction offers SA Corp the opportunity to acquire an established and experienced management team in the residential sector. For
2 AFHCO shareholders the saie provides an opportunity to realise their investment at an appropriate time in their careers.
Relevant Market and Impact on Competition
[7] SA Retail group is a collective investment scheme which invests in property (also known as a property unit trust). It has a total of 134 properties that comprises of 26 retail properties, 89 industrial properties and 19 office properties and they are all located in the Gauteng Province. Relevant for this transaction are the 124 properties.
[8] AFHCO is a property investment company that has a total of 62 properties comprising of 27 residential properties, 31 retail properties, 1 light industrial property and 4 office properties mostly located within the Johannesburg Central Business District (“CBD") and Newtown.
[9] The proposed transaction does result in horizontal overlap arising in relation to provision of B-Grade and C-Grade office space, the market for provision of rentable retail space in convenience centres and the market for provision of rentable space in light industrial property.
[10] In the market for Grade B and C office properties 7 properties were identified as overlapping post the transaction. However, the Competition Commission found that there is no geographic overlap in the areas of rentable office space in B-Grade and C-Grade and the market for the provision of rentable space in light industrial property. The B-Grade and C-Grade properties are not within the same node as AFCHO, the B-Grade is within a 26km distance and the C- Grade office properties are within a 5km distance.
[11 ] The Commission also considered the market for provision of rentable space in retail property within the 6km distance of the Johannesburg CBD nodie. In this node SA Corp has a total GLA of 5506m2 and a market share of 2.2% and AFHCO has a total GLA of 40926 and a market share of 14.4%. SA Corp will have a post -merger market share of 16.6%, The Commission found that the parties post-merger estimated market shares were not significant to raise competition concerns and competitors in the market still have a market share of 83.4% and a GLA of 246 213mz. Competitors include; Bel Air shopping centre (7.3%), Centro Continental (6.0%), Thrupps Centre (5.4%) and Bfamley shopping centre.
[12] In the market of provision of rentable space in light industrial property, the Commission found that none of the SA Corp properties are Ideated within the South-West Industrial node where AFHCO’s one property is located therefore there is no geographic overlap.
Conclusion
[12] In light of the above we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in the market for provision of rentable of B-Graae and C-Grade office space, the market for provision of rentable retail space in convenience centre and the market for provision of rentable space in light industrial property. In addition, no public interest issues arise from the proposed transaction. Accordingly we approve the proposed transaction unconditionally.
July 2014
Prof. F Tregenna DATE Prof. I Valodia and Mr A Roskam concurring
Tribunal Researcher: Moleboheng Moleko
For the merging parties: Desmond Rudman - Webber Wentzel
For the Commission: Hardin Ratshiisusu, Xolela Nokele, Seema Nunkoo
and Dineo Mashego.
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