Capco / Shaftesbury merger inquiry
| Case Outcome | Mergers - phase 1 clearance |
| Decision Date | 15 November 2022 |
| Date | 15 November 2022 |
| Subject Matter | Mergers |
| Court | Competition and Markets Authority (EW) |
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Merger between Capital & Counties
Properties PLC and Shaftesbury PLC
Decision on relevant merger situation and substantial
lessening of competition
ME/7008/22
The CMA’s decision on reference under section 33(1) of the Enterprise Act 2002 given on
22 February 2023. Full text of the decision published on 5 April 2023.
Please note that [] indicates figures or text which have been deleted or replaced in
ranges at the request of the parties or third parties for reasons of commercial
confidentiality.
SUMMARY
1. Capital & Counties Properties PLC (Capco) has agreed to acquire the whole of the
issued and to be issued share capital of Shaftesbury PLC (Shaftesbury) (the
Merger). Capco and Shaftesbury are together referred to as the Parties. For
statements referring to the future, Capco and Shaftesbury are together referred to
as the Merged Entity.
2. The Competition and Markets Authority (CMA) believes that it is or may be the case
that each of Capco and Shaftesbury is an enterprise; that these enterprises will
cease to be distinct as a result of the Merger; and that the turnover test is met.
Accordingly, arrangements are in progress or in contemplation which, if carried into
effect, will result in the creation of a relevant merger situation.
3. The Parties overlap in the supply of Retail and Hospitality rental space in Covent
Garden (including the Opera Quarter).
4. The CMA has assessed whether it is or may be the case that the Merger may be
expected to result in a substantial lessening of competition (SLC) as a result of:
(a) horizontal unilateral effects in the supply of Retail rental space in Covent
Garden (including the Opera Quarter); and
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(b) horizontal unilateral effects in the supply of Hospitality rental space in Covent
Garden (including the Opera Quarter).
5. The CMA has assessed the competitive constraints on the Parties, both within and
outside Covent Garden (including the Opera Quarter), from properties in other areas
within the West End and wider Central London.
6. In relation to horizontal unilateral effects in the supply of each of:
(a) Retail rental space in Covent Garden (including the Opera Quarter); and
(b) Hospitality rental space in Covent Garden (including the Opera Quarter),
the CMA found that while the Parties may compete more closely with each other
than with other landlords due to the proximity and scale of their holdings, there are
many alternative landlords available to tenants who are considering locating in
Covent Garden (including the Opera Quarter). The Merged Entity will face
competition from some large and a number of smaller landlords in the area, as well
as other landlords in a number of other locations both within the West End and in
more distant locations in Central London.
7. These constraints, taken together, are sufficient to ensure that the Merger does not
give rise to a realistic prospect of an SLC as a result of horizontal unilateral effects.
8. The Merger will therefore not be referred under section 33(1) of the Enterprise Act
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ASSESSMENT
PARTIES
9. Capco and Shaftesbury are UK-registered Real Estate Investment Trusts (REITs)
and landlords of lettable units in Central London.1 The properties they own are
predominantly freehold.2 Both Parties let units out for Retail (eg, shops, markets,
banks, supermarkets), Hospitality (eg, bars, cafes, public houses, and restaurants),
and Leisure (eg, casinos, theatres, hotels, and gyms)3 uses, as well as for office
and residential uses.
10. Capco owns the Covent Garden Market Building (in the Covent Garden Piazza) and
properties in surrounding streets.4 The turnover of Capco in the financial year ended
31 December 2021 was £68m, and was entirely generated in the UK. Its shares are
listed on the London Stock Exchange with a secondary listing on the Johannesburg
Stock Exchange. Capco also holds a 25.2% shareholding in Shaftesbury.
11. Shaftesbury owns properties in Covent Garden (in the Coliseum area and an area it
describes as the Opera Quarter5), Seven Dials, Carnaby,6 parts of Soho, and
Chinatown. Shaftesbury is also party to a 50/50 joint venture with the Mercers’
Company (Mercers), known as the Longmartin JV.7 The Longmartin JV’s property
interests are centered around St Martin’s Courtyard, an area which bridges Capco’s
property holdings in Covent Garden and Shaftesbury’s property holdings in Seven
Dials. Shaftesbury’s turnover in the financial year ended 30 September 2022 was
1 The CMA has not found it necessary to define Central London. The Parties’ definition appears to include the
geographic area extending to Pimlico, Victoria and Belgravia to the southwest, Mayfair to the west (including a small part
of Hyde Park), part of Marylebone (only up to Marylebone Road) to the northwest, Soho, Covent Garden, Fitzrovia,
Bloomsbury, Holborn, up to Clerkenwell to the northeast, Shoreditch, Liverpool Street, and up to Tower Hill to the
southeast (not including St. Katherine Docks). To the south, the area is bordered by the River Thames. Final Merger
Notice submitted on 22 December 2022 (FMN), Figure 9.
2 FMN, paragraph 2.18.
3 Parties’ response to the CMA’s request for information dated 12 August 2022 (RFI1), question 23, Table 1. Parties’
response to the CMA’s request for information dated 14 December 2022 (RFI6), question 1.
4 Capco also has a 50% share in the Lillie Square JV, a residential development located in West Brompton, with the
Kwok Family Interests. FMN, footnote 4 and paragraph 1.
5 Shaftesbury uses the term Opera Quarter to describe its holdings that are behind the Royal Opera House (between
Wellington Street and Catherine Street). FMN, Annex 8, Shaftesbury property list.
6 Carnaby is located in the area centered on Carnaby Street and extends to 13 surrounding streets. FMN, paragraph
3.25.1.
7 The CMA considers that Shaftesbury has the ability to exercise material influence over the Longmartin JV because of
its 50% shareholding, board representation, and veto rights (explained in Shaftesbury’s response to the CMA’s question
dated 24 January 2023, paragraphs 1.1 to 1.4), such that the interests of the Longmartin JV are attributed to Shaftesbury
for the purposes of the analysis contained in the competitive assessment.
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