On 20 July 2012 the Competition Tribunal (Tribunal) issued its
reasons for the conditional approval of the intermediate merger
between Synergy Income Fund Limited (Synergy) and Khuthala Alliance
(Proprietary) Limited (Khuthala). The conditions were issued to
protect small businesses by requiring the removal of the
exclusivity clause from the lease between Spar and Khuthala.
Spar is a 20% shareholder in Capital Land Asset Management
(Proprietary) Limited, which is the fund manager of Synergy. The
transaction was conditionally approved by the Tribunal on 8 March
2012.
Synergy is a variable loan stock company that owns certain retail
property in various shopping centres that acquired the letting
enterprise from Khuthala, known as the King Senzangakhona Shopping
Centre.
The Competition Commission (Commission) found a horizontal overlap
in respect of the provision of rentable retail space in South
Africa. The Commission however found no geographical overlap and
therefore concluded that the proposed transaction between the
parties is unlikely to lessen or prevent competition in the
market.
The Commission did, however, raise a public interest concern in
relation to the exclusivity clause in the lease agreement between
Spar and Khuthala. Although the inclusion of this clause is an
industry-wide practice, the Commission assessed these clauses as
creating a barrier to entry and excluding competition, with small
independent retailers being most affected.
The conditions imposed by the Commission require Spar and the
merging parties to negotiate to remove the exclusivity clause on
renewal of the lease, and to provide a report to the Commission
when the condition has been complied with.
Webber Wentzel represented the merging parties.
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