Apexhi Properties Limited and Old Mutual

The judgment

The court's own file

COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: 72/LM/Aug06 In the matter between: ApexHi Properties Limited Acquiring Firm And Old Mutual Life Assurance Company (SA) Ltd Target Firm Panel : N Manoim (Presiding Member), T Orleyn (Tribunal Member), and M Mokuena (Tribunal Member) Heard on : 27 October 2006 Decided on : 27 October 2006 Reasons Issued: 7 November 2006 Reasons for Decision Approval

[1]On 27 October 2006 the Tribunal issued a merger clearance certificate unconditionally approving the merger between ApexHi Limited and the immovable property owned by Old Mutual Life Assurance Company (SA) Ltd. The reasons for approving the transaction follow. The Parties

[2]The primary acquiring firm is ApexHi Limited (“ApexHi”), a variable rate property company loan stock listed on the JSE Securities Exchange. No firm directly or indirectly control ApexHi. Its stakeholders in terms of “A” Units and “B” Units are: A Units B Units % held % held [2.1] Old Mutual 10.1 5.9 2 [2.2] Redefine Income Fund 9.4 15.3 [2.3] Coronation 7.6 - [2.4] StanLib 5.9 8.4 [2.5] Investec 5.8 6.3 [2.6] Marriot Funds - 5.0 [2.7] Other 61.2 59.2

[3]The primary target firm is Old Mutual Life Assurance Company (SA) Limited (“OMLACSA”). OMLACSA is a wholly owned subsidiary of Old Mutual Life Holdings, which in turn is a wholly owned subsidiary Old Mutual South Africa Limited (“OMSA”). 1 The Transaction

[4]ApexHi is acquiring from OMLACSA nine property letting enterprises as a going concern. These comprise the immovable properties, lease and the property letting enterprises conducted in respect of such properties. TABLE 1 Property portfolio being acquired Property Geographical area Type Grade Freeway Centre Wynberg, Sandton Retail C Sentrakor Pretoria CBD Office with Retail D 1 OMSA’s ultimate controlling company is Old Mutual plc (“OM”), a public company incorporated in the United Kingdom, and is listed on the London, Malawi, Namibia and Zimbabwe Stock Exchanges and on the JSE Securities Exchange. 3 President Centre Pretoria CBD Office with Retail D Steyns Arcade Pretoria CBD Office with Retail D Oudehuis Centre Sommerset West Retail Neighbourhood Shopping Centre-B 5 Girton Road Parktown Office B Kempton Square Kempton Park Community Community Fabric Park Midrand Light Industrial Prime-B Pepsi Aeroton Light Industrial Prime-B Rationale for the transaction

[5]ApexHi views the transaction as enhancing and complementing the quality, size, diversification, and risk profile of its existing portfolio of properties in the rentable office space, rentable retail space and rentable industrial space sectors.

[6]OMLACSA perceives the transaction as an advancement of its strategy to dispose of properties that no longer fit its investment profile. Such properties are deemed non-core. The parties’ activities The Primary Acquiring Firm ApexHi

[7]ApexHi’s property portfolio is spread throughout South Africa and includes properties in the rentable office space, rentable retail space, and rentable light industrial space. For the purposes of this transaction the following properties are relevant: TABLE 2 Property Geographical Area Type Grade Princess of Wales Parktown Offices B Victoria Gate Parktown Offices B 4 The primary target firm

[8]OMLACSA is a wholly owned subsidiary of Old Mutual Life Holdings (South Africa) Limited and is a registered long-term insurer. OMLACSA has a portfolio of properties throughout South Africa in the rentable office space, rentable retail space, and rentable light industrial space sectors. The properties it is disposing of in this transaction are listed in Table 1 above. Relevant market

[9]In defining the geographic and product markets, the Commission and the parties relied on the information from the Investment Property Databank of South Africa (“IPD”) which has identified different nodes in consultation with market participants and the South African Property Owners’ Association (“SAPOA”). In the case of In the case of Growthpoint and Business Technology Holdings, 2 the Tribunal questioned the reliability of information from SAPOA as the only tool used for an antitrust analysis. 3 In this decision it is not necessary to precisely define the market because the market shares are too small and do not raise competition concerns. It is thus not necessary to deal with concerns raised by the Tribunal in the case of Growthpoint and Business Technology Holdings. Competition analysis

[10]Post-merger the merging parties will have a combined market share of 4.68%. 4 This market share is insignificant and does not raise any competition concerns.

[11]Furthermore, there are other property owning companies in the relevant nodes that compete with the merging firms. These include, among others, Acucap Properties, Capital Property Fund, Growthpoint Properties, Hyprop 2 Growthpoint and Business Connection Technology Holdings Tribunal case number 49/LM/Jun06. 3 Ibid par 9-19 of post-script analysis. 4 The market shares are obtained from SAPOA. The Commission also contacted IPD to verify information submitted by the parties and was informed that the IPD relied on information from SAPOA especially with regards to office properties (cf Record p7). See also pp32-35 of the record. 5 Investments, and Paramount Property Fund. The Commission stated that the industry players it contacted indicated that the merging firm are small players in the property sector. 5 Public Interest Issues

[12]There are no public interest issues. Conclusion

[13]The transaction will not lead to a substantial prevention or lessening of competition and is accordingly approved. The post-merger market shares of the parties remain low and there are various players in the relevant nodes that compete with the merging firms. Moreover, there are no public interest concerns that may affect this conclusion. ________________ 7 November 2006 N Manoim DATE Tribunal Member T Orleyn and M Mokuena concur in the judgment of N Manoim. Tribunal Researcher: R Kariga For the merging parties: Vani Chetty, Edward Nathan Sonnenbergs Attorneys For the Commission : Kwena Mahlako ana and Makgale Motlala (Mergers and Acquisitions) 5 Record p7.