Automated Summary
Key Facts
The Competition Tribunal of South Africa approved the merger between Government Employees Pension Fund (GEPF), Growthpoint Properties Limited, and Lexshell 44 General Trading (Pty) Ltd subject to a condition. The merging parties are engaged in owning and renting retail and commercial properties, with Lexshell controlling the V&A Waterfront in Cape Town. The Commission found limited horizontal overlap in residential, hotel, and industrial properties but identified potential coordinated effects if PIC appointed the same director to Lexshell and its competitor Pareto Limited. The Tribunal required an undertaking ensuring no shared director appointments to mitigate this risk. Post-merger market shares in retail, office, and industrial sectors were deemed insufficient to substantially lessen competition.
Issues
- The Tribunal identified a risk of coordinated effects if the Public Investment Corporation (PIC) appointed the same director to both Lexshell (post-merger) and Pareto Limited (a competitor controlling Cavendish Square and Tygervalley Mall). To mitigate this, the PIC provided an undertaking ensuring no overlapping director appointments between Lexshell and Pareto, which the Tribunal accepted as a condition for approval.
- The Competition Tribunal addressed whether the merger between Government Employees Pension Fund (GEPF), Growthpoint Properties Limited, and Lexshell 44 General Trading (Pty) Ltd would result in a substantial lessening of competition in the markets for rentable retail space (regional shopping centres), grade A and B office space, industrial space, hotel and leisure, and residential property. The Commission found minimal combined market shares in most sectors (e.g., 18% in regional retail, 21% in grade A office space) insufficient to prevent competition, though the Tribunal imposed a condition to mitigate potential coordinated effects from overlapping directorships.
Holdings
- The Competition Tribunal approved the merger between Government Employees Pension Fund, Growthpoint Properties Limited, and Lexshell 44 General Trading (Pty) Ltd subject to a condition that PIC will not appoint the same individual to the boards of Lexshell and Pareto Limited to prevent coordinated effects in the market.
- The Tribunal found no public interest issues, as the merger is not anticipated to result in retrenchments.
Remedies
The merger was approved subject to a condition preventing PIC from appointing the same director to both Lexshell and Pareto boards to avoid coordinated effects in the market.
Legal Principles
The tribunal applied the principle of preventing a substantial lessening of competition in the market for rentable retail and office space, as outlined in competition law. This included assessing market shares, geographic overlap, and potential coordinated effects post-merger.
Cited Statute
Competition Act, 1998 (Act No. 89 of 1998)
Judge Name
- Norman Manoim
- Yasmin Carrim
- Andreas Wessels
Passage Text
- At the hearing it was established that the PIC will have the right to appoint directors to the board that will control Lexshell and thus the Waterfront property. The PIC also has the right to appoint a director to the board of Pareto Limited... If this happened the merger would make co-ordinated effects in the market more likely as the merger would create an opportunity for information exchange.
- We are satisfied that if the undertaking becomes a condition for the approval of the merger it will reduce the possibility of information exchanges taking place between management of rival shopping centres.
- The undertaking provides that for as long as PIC is a shareholder (directly or through any other controlled entity) in Lexshell and also holds a minority interest in Pareto, any individual appointed by the PIC to serve on the board or as an executive in Lexshell, will not be appointed to the board of Pareto or any of Pareto's subsidiaries.