- March 11, 2007
- Posted by: admin
- Category: Tsogo Sun Holdings
JOHNNIC Holdings is under pressure from the Competition Commission to get rid of one of its prime properties, the conference and exhibition venue Gallagher Estate in Midrand, Gauteng. If it does not dispose of the asset, it places its merger with investment company HCI at risk. Johnnic had agreed to sell Gallagher Estate by December 7 in order for HCI`s acquisition of Johnnic to be approved. It has failed to do so — and it may be forced into a fire sale. The Competition Tribunal approved the acquisition of Johnnic by HCI in December 2005 on condition that Johnnic sell Gallagher Estate within a year. A three month extension was granted until March 8. The Competition Commission said this condition has not been met. Lizel Blignaut, divisional manager of mergers and acquisitions at the Competition Commission, said that if the original buyer did not “get its ducks in a row” after a year, the property could be offered to an independent purchaser “at any price”. “That’s usually a good enough incentive for parties to comply,” she said. The commission had agreed to the sale of Gallagher Estate at the time of the acquisition. However, there is now a dispute over what exactly constitutes Gallagher Estate. Johnnic said it understood that it had to sell only Gallagher’s exhibition and conference facilities. This is because HCI, through Tsogo Sun, has an interest in the Sandton Convention Centre. But in terms of the commission’s approval of the deal, it was clearly stated that Johnnic would have to sell Gallagher Estate. Blignaut said the conference and events business is intrinsically linked to the property. Asked if the merger could fall apart, Blignaut said it was “too early to say”. Andre van der Veen, CEO of Johnnic Holdings, said: “We have concluded an agreement to sell the exhibition business to an independent buyer, who would take over the business as soon as the commission or tribunal approves the sale. “We have given the buyer an option to acquire the exhibition properties once the sub-division [of Gallagher Estate] is completed. We need time to do the subdivision, which we are already committed to. In the interim we have concluded an arms-length lease agreement for the property with the buyer. “The commission took a narrow view of the Tribunal order. It’s frustrating and perplexing to us as the commission’s interpretation of the order effectively means that Johnnic is forced to sell the Pan-African Parliament, Midrand office buildings and vacant land which have no competitive issues associated with them. This cannot be the intention of the tribunal order. “We committed to the Tribunal to sell the exhibition business. Everything has been done to complete that. But the property will take time to sub-divide from others.” He said they would go back to the Tribunal to ask for clarification of the order and to approve the sale of the exhibition business. “We believe we’ve honoured our commitment to sell our stake in the exhibition business.” HCI sought out Johnnic for several aspects: R450-million in cash, an effective 30% interest in Sun Coast casino in Durban and an effective 9.5% interest in Tsogo Investment Holdings group, which owns several casinos and hotels.
Source:Sunday Times Business – Adele Shevel