Winter Robin Investment 26 Proprietary Limited v Development Rights (LM215Jan16) [2016] ZACT 13 (16 March 2016)
- Citation
- [2016] ZACT 13
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, lmraan Valodia, Fiona Tregenna
- Case number
- LM215Jan16
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, lmraan Valodia, Fiona Tregenna
- Case number
- LM215Jan16
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 market for industrial warehouse property. The merged entity's market share post-merger would remain constrained by the presence of alternative properties and competitors. Furthermore, the transaction would increase market capacity by developing currently vacant assets, thereby expanding the market rather than increasing concentration. The Tribunal also determined that there were no adverse public interest effects, including on employment. Accordingly, the transaction was approved unconditionally.
Court disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Winter Robin Investment 26 Proprietary Limited and the Development Rights situated at Pocket 24 and Pocket 3 of the Waterfall Business Estate is approved without conditions.
02
Material facts
Parties
Winter Robin Investment 26 Proprietary Limited
Applicant Counsel: Edward Nathan Sonnerbergs IncAttacq Waterfall Investment Company Proprietary Limited and Portmix Proprietary Limited (collectively, the Sellers)
RespondentAmounts and remedies
- Post Merger Market Share (approximate): 25
- Industrial Warehouse Property Vacancies (square Metres): ZAR 59,209
- Industrial Warehouse Property Vacancy Rate (percentage): 8.59
03
Procedural history
Posture
Merger Approval / Final Determination
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition of development rights by Winter Robin Investment 26 Proprietary Limited will substantially prevent or lessen competition in the relevant industrial warehouse property market.
- 02
Whether the transaction raises any public interest concerns, including adverse effects on employment.
Party arguments
- Applicant
- The applicant contended that the acquisition of the development rights would not result in a substantial prevention or lessening of competition within the relevant market. It argued that the properties in question are currently vacant and their development would increase market capacity rather than concentration. The applicant further submitted that there would be no adverse impact on employment or other public interest concerns.
- Respondent
- The Sellers and the Commission argued that, although there is a horizontal overlap in the market for rentable industrial warehouse space, the merged entity's post-merger market share would be constrained by several competing properties and market participants. They highlighted the existence of significant property vacancies and new developments in the area, supporting the view that competition would not be negatively affected. No public interest concerns, including employment, were identified.
05
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, including employment effects, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction would not substantially prevent or lessen competition in the relevant market for industrial warehouse property. The merged entity's market share post-merger would remain constrained by the presence of alternative properties and competitors. Furthermore, the transaction would increase market capacity by developing currently vacant assets, thereby expanding the market rather than increasing concentration. The Tribunal also determined that there were no adverse public interest effects, including on employment. Accordingly, the transaction was approved unconditionally.
Obiter and limits
- Existing market shares may overstate the competitive position when a merger leads to the development of new assets not yet in the market.
- The availability of alternative properties and ongoing new developments in the area further mitigate any potential anti-competitive effects.
Court disposition
The proposed transaction is approved unconditionally.
- The merger between Winter Robin Investment 26 Proprietary Limited and the Development Rights situated at Pocket 24 and Pocket 3 of the Waterfall Business Estate 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: LM215Jan16
In the matter between:
WINTER ROBIN INVESTMENT 26 PROPRIETARY LIMITED Primary Acquiring Firm
and
THE
DEVELOPMENT RIGHTS SITUATED AT POCKET 24 Primary Target Firm
POCKET 3 OF THE WATERFALL BUSINESS ESTATE
Panel
: Norman Manoim (Presiding Member)
: lmraan Valodia (Tribunal Member)
: Fiona Tregenna (Tribunal Member)
Heard
: 17 February 2016
Order Issued on
: 17 February 2016
Reasons Issued on : 16 March 2016
Reasons for Decision
Approval
[1] On 17 February 2016, the Competition Tribunal ("Tribunal") approved the proposed transaction between Winter Robin Investment 26 (Pty) Ltd and the Waterfall Business Estate without conditions.
[2] The reasons for approving the proposed transaction follow.
Parties to proposed transaction
Primary acquiring firm
[3] The primary acquiring firm is, Winter Robin Investment 26 (Ply) Ltd.
[4] The merging parties submit that JVCO does not control any firm as it has been specifically incorporated for the purpose of the proposed transaction. JVCO is controlled by Sanlam Properties (Ply) Ltd (Sanlam Properties). Sanlam is ultimately controlled by Sanlam Limited, a public company listed on the Johannesburg Stock Exchange ("JSE") and the Namibian Stock Exchange ("NSE").
[5] JVCO, Sanlam Properties, Sanlam and all its subsidiaries will collectively be referred to as the Acquiring Group. Within South
Africa, the Acquiring Group provides Life insurance, short term insurance, commercial banking, securities trading, retirement annuities, unit-trust, health insurance and employment benefits. The Acquiring Group is active in the property market and also in the provision of investment and risk management to group funds.
Primary target firm
[6] The primary target firm consists of two properties in the Waterfall Estate Business district which are currently vacant but which the merging parties seek to develop. [1]
[7] In respect of the activities of the Development Rights, the Pocket 24 Development Rights entitles the holder to conduct a warehouse and distribution centre and the Pocket 3 Development Right is a piece of land currently zoned for agricultural purposes.
[8] Pocket 24 Development Rights and Pocket 3 Development Rights will from hereon be collectively referred to as the Development Rights[2]
Proposed transaction and rationale
[9] Through a number of interrelated steps the proposed transaction will result in the acquiring company JVCO acquiring the Development Rights from the Sellers[3]. Post merger, JVCO will have sole control over the Development Rights.
[10] According to the merging parties the proposed transaction provides an opportunity to sell the Development Rights in order to share the risk and profits of any future industrial or commercial development.
Impact on competition
[11] The Commission considered the activities of the merging parties and found that there is a horizontal overlap in the market for the provision of rentable space in industrial warehouse property within a broader node encompassing Brakfontein/ Midrand/ Cosmosdal/ Lombardi.
[12] The merged entity will have a combined post-merger market share of between 20 - 30% within this node.[4] The Commission found that the merged entity will continue to be constrained by other industrial warehouse properties within the market. Other players in this market are, inter alia, Fortress Income Fund, 40 Brakfontein, HPB Industrial Unit, One Highveld, Twenty One, Bell Crescent and Redefine Properties.
[13] The Commission also considered whether there are vacancies in Brakfontein/ Midrand/ Cosmosdal/ Lombardi. Through a desktop search, the Commission found that there are at least 59 209m2 (approximately 8.59%) property vacancies for industrial warehouse properties in the identified nodes. The Commission obtained this vacancy data from a property broker website. Further, there are new developments within the identified market.
[14] Given the availability of alternatives competing properties within each of the identified markets, the Commission is of the view that the proposed transaction is unlikely to prevent or lessen competition in the relevant market.
[15] We concur with the Commission's conclusion that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market. It should be pointed out that in this transaction existing market shares overstate the
position, as the merger leads to an increase in capacity by developing assets not yet in the market and thus it grows the market
rather than leading to an increase in concentration.
Public interest
[16] The merging parties confirmed that the proposed transaction will not result in any adverse impact on employment.
[17] The proposed transaction further raises no other public interest concerns.
Conclusion
[18] In light of the above, we conclude 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 approve the proposed transaction unconditionally.
16 March 2016
DATE
_______
Mr Norman Manoim
Prof lmraan Valodia and Prof Fiona Tregenna concurring
Tribunal Researcher: Busisiwe Masina
For the merging parties: Edward Nathan Sonnerbergs Inc
For the Commission: Reabetswe Molotsi
[1] The properties are situated at Pocket 24 of the Waterfall Business Estate("Pocket 24 Development Rights") and the development
right situated on a portion of Pocket 3 of the Waterfall Business Estate ("Pocket 3 Development Rights"). Pocket 24
Development Rights is controlled by Attacq Waterfall Investment Company (Pty) Ltd and Pocket 3 Development Rights by Portmix (Ply) Ltd.
[2] The merging parties submit that an application has been made for this portion of the Pocket 3 Development Right to be zoned for commercial use.
[3] The Pocket 24 Development Rights is controlled by Attacq Waterfall Investment Company Proprietary Limited ("AWIC"). "AWIC" is controlled by Attacq, a public company listed on tbe JSE. The Pocket 3 Development Rights is controlled by Portrnix Proprietary Limited ("Portmix"). Attacq and Portmix will collectively be referred to as the "Sellers".
[4] Confidential information.
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