The Competition Commission has, with conditions, approved the sale of explosives and chemicals company AECI’s vacant land in Modderfontein to Chinese diversified property development company Shanghai Zendai Property.

With this approval, all conditions precedent to the transaction had now been fulfilled.

The transaction involved the acquisition of about 1 600 ha of land and the buildings thereon, as well as property development business Heartland Properties and investment holding company AECI Real Estate.

AECI CFO Mark Kathan said last year that the deal was expected to be effective by July 31, by which time land would be transferred to Shanghai Zendai.

Thereafter, AECI would receive the full cash payment of R1.06-billion and would have up to 42 months to transfer the remaining land.

The Competition Commission said in a statement on Tuesday that it had approved the acquisition on condition that the Chinese investor reduced the period of restraint of trade imposed on the seller from ten to five years. 

In its investigation, it found that the agreement between AECI and Zendai contained a restraint of trade clause in terms of which AECI undertook not to engage in the business of property development in the Modderfontein area.

“From a competition law perspective, a restraint of trade may often amount to prohibited practice of market allocation in contravention of the Competition Act. The commission is of the view that the ten-year restraint period [is] too long, unjustified and likely to frustrate potential re-entry by the seller in the Modderfontein area,” it noted.

Further, concerns were raised by market participants relating to environmental pollution, the sale of land to a foreign company and that the agreement between the firms did not allow the construction of social housing, which undermined the government’s development policy of community integration.

However, the commission advised these parties that it lacked jurisdiction over the concerns raised and that these could be best addressed by other government agencies. 

The complainants were advised to lodge these concerns with the respective agencies.

The commission’s investigation further found that the acquisition by the Chinese investor would not result in retrenchments, as the land was bought as a going concern.

The investor also undertook not to retrench any employees and not to change the terms of conditions of employment. 

MARRIOT ACQUISITION

The commission added on Tuesday that it had unconditionally approved the sale of 80 Protea Hotels in South Africa by international hotel licensing company Sarl.

The acquiring group managed residential properties worldwide under several brand names, including the Marriot brand.

Currently, Marriot did not have any hotel business, residential business or any other business activity within South Africa.

The commission found that the merger was unlikely to substantially prevent or lessen competition, as there was no geographic overlap between the activities of the merging parties.

The transaction, in essence, introduced Marriot into South Africa.