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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.