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JOHNNIC BUYS TIME OVER SALE OF GALLAGHER ESTATES

Johannesburg – Johnnic has obtained an interdict restraining the competition authorities from compelling it to sell Gallagher Estate as it was required to do in terms of a competition tribunal ruling issued in December 2005. The interdict will prevail until the competition appeal court considers an appeal against the ruling. In December 2005 the tribunal granted Hosken Consolidated Investments (HCI) approval to acquire Johnnic, the media and entertainment group, on condition that the merged entity disposed of the Gallagher Estate and Convention Centre within 12 months of the order. The tribunal’s condition was based on the view that if HCI acquired Johnnic, then the combined entity would have a dominant position in the Gauteng exhibition and conference market. Johnnic not only owned Gallagher Estate, but held a significant indirect interest in Tsogo Sun, which owns the Sandton Convention Centre. This position would be considerably strengthened as a result of a merger with HCI, which also had a major stake in Tsogo Sun. Last year the tribunal granted Johnnic an extension to that deadline. Earlier this year Johnnic approached the competition commission and proposed that instead of selling Gallagher Estate that it would lease it. The commission rejected the proposal on the grounds that it did not meet the requirements set down by the tribunal’s condition. It appears from Johnnic’s 2007 annual report, which has just been released, that the company has subdivided Gallagher Estate into two sections: one comprising the conferencing and exhibition business and a second comprising an office block, the Pan African Parliament building and certain undeveloped land. Johnnic is willing to sell the conferencing and exhibition business, but wants to retain the other property. Johnnic chairman Marcel Golding writes in the report that the competition commission “regrettably holds the view that the disposal of the exhibition business can only be achieved through the sale of Gallagher Estate in its entirety”. The tribunal’s decision to grant approval to HCI’s acquisition of Johnnic in 2005 marked the end of a very tense battle for control of Johnnic, which had played out through much of 2005. HCI was keen to get control of Johnnic in order to get access to Johnnic’s stake in Tsogo Sun. Johnnic’s annual report reveals that Gallagher Estate is security for a R33.3 million short-term loan. In financial 2007 Gallagher contributed R18 million of the firm’s total headline earnings of R114 million.

Source: Business Report – Ann Crotty