Parties
[2].
The acquiring firm is Pangbourne Properties Limited (“Pangbourne”), a company listed under
the real estate sector of the JSE. Pangbourne is not directly or indirectly controlled by any firm. It also submitted by the parties
that Pangbourne is not controlled by any single entity. Pangbourne has 43% interest in Siyathenga Property Fund Ltd (Siyathenga)
and it also has 37% interest in iFour Properties Ltd (iFour).
[3].
The primary target firms are Calulo Property Fund Ltd (“Calulo”), Calulo Asset Management
(Pty) Ltd (“CAM”) and Calulo Property Management (Pty) Ltd (“CPM”). No entity directly or indirectly controls Calulo. The shareholders of Calulo are Micawber 398 (Pty) Ltd (“Micawber 398”), which holds 18%, and Matemuka Property Acquisitions 104 (Pty) Ltd (“ Matemuka”), which holds 40.6% interest. It is submitted
by the parties that individual members of the public who are all minority shareholders hold the remaining interest, being 41.4%.
The Proposed Transaction
[4].
This transaction involves the acquisition by Pangbourne of a 40.6% interest in Calulo comprising of a
unit holding 36 641 418 linked units held in Calulo from Matemuka. As part of an indivisible component of the transaction, Pangbourne is also acquiring 100% of the issued
share capital in CAM and as part of a further component of the transaction, Pangbourne is acquiring 100% of the enterprise (comprising
the property management of the property portfolio of Calulo) of Calulo from the controlling firms of CPM.
The Rationale of the Transaction
[5].
The Calulo acquisition is in line with Pangbourne’s strategy to invest in specialised funds and,
more particularly, in this instance to establish a specialised office fund. The size of the transaction will allow Pangbourne to
achieve the critical mass required to take advantage of its PROPS Commercial Mortgage Backed Securitisation Programme and enable
Pangbourne to reduce its cost of capital in line with its strategy of growth distributions.
Parties’ Activities
[6].
The acquiring firms are property loan stock companies listed on the JSE limited under the Financial-Real
Estate category. Pangbourne, iFour and Siyathenga have a portfolio of industrial, commercial and retail properties. Calulo is a variable
loan stock company listed on the JSE under Financial Real estate category, which owns investments in properties through its wholly
owned subsidiary, Calulo Property Investments (Pty) Ltd.
[7].
Calulo is a variable loan stock company listed on the JSE under the Financial Real Estate category, which
owns investments in properties through its wholly owned subsidiary, Calulo Property Investment (Pty) Ltd and its property portfolio
comprises of the following; light industrial property, office property and retail property. CAM is a property asset management company
and CPM is a property is a property management company. According to the parties both the asset management services of CPM are provided
in-house only in respect of Calulo Property Portfolio.
Relevant Product and Geographic Market
[8].
The relevant product market is the market for Grade A and B office properties as well as light industrial
properties. The Commission also found that there is a geographic overlap between the merging parties in respect of Grade A offices
in the Bryanston node; Grade A offices in the Sunninghill node and Grade B offices in the Bloemfontein node. It was submitted by
the parties in their filing that the acquiring firm does not have any light industrial properties in the areas where the target firm’s light industrial
properties are situated and as a result the Commission did not consider light industrial properties any further as there is no geographic
overlap in the activities of the merging parties.
Competition Analysis of the Merger
[9].
The Commission’s investigation revealed that the merging parties would enjoy a combined post merger
market share of 6.6% in the market for Grade A office space in Sunninghill node. The Commission’s investigation further found
that the merging parties would enjoy a combined post merger market share of 3.1% in the market for Grade A office space in the Bryanston
node and a market share of 9.23% for Grade B office space in the Bloemfontein node. The Commission also found that there are other
property owning companies in the relevant nodes that compete with the merging firms. The market share remains low and is unlikely to raise any competition
concerns.
Public interest
[10]. No public interests issues arise from the merger.
Conclusion
[11]. Based on the above the transaction will not result in a substantial lessening or prevention of competition in the identified
markets and is accordingly approved unconditionally.
___________________
11 October 2006
Date
Y Carrim
Tribunal Member
D Lewis and N Manoim concurring.
Tribunal Researcher
: J Ngobeni
For the merging parties
: Vani Chetty (Edward Nathan Corporate Law
Advisers)
For the Commission
: Mogale Mohlala and Kwena
Mahlakoana
Mergers and Acquisitions
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