Federation Centres Limited - s.87B undertaking

On 21 May 2015, the ACCC announced it had accepted undertakings from Federation Centres (Federation) and Novion Property Group (Novion) (the parties) in relation to Federation and Novion’s proposal to merge via a scheme of arrangement (Proposed Merger).

The parties both gave undertakings to the ACCC in relation to the Proposed Merger.

Federation has given an undertaking to the ACCC to divest its 50% interest in Karingal Hub Shopping Centre (Karingal Hub), unless a notice is provided to the ACCC that, pursuant to the Novion undertaking, the Bayside Shopping Centre (Bayside) will be divested.

Novion has also given an undertaking to the ACCC in a similar form requiring that it may divest its 100% interest in Bayside, unless a notice is provided to the ACCC that Karingal Hub, pursuant to the Federation undertaking, will be divested.

The parties will nominate which shopping centre they will divest. The ACCC considered that the divestiture of either shopping centre would address the ACCC’s competition concerns in relation to the Proposed Merger.

The ACCC concluded that in the absence of the undertakings, the Proposed Merger would likely result in a substantial lessening of competition in relation to the supply of shopping centre amenities to customers (shoppers) in south east Melbourne. The ACCC was also concerned that the Proposed Merger could result in anti-competitive effects in the supply of retail space in shopping centres to retailers.

The objective of the undertakings is to address the ACCC's competition concerns which would otherwise arise as a consequence of the Proposed Merger.

The Federation undertaking requires Federation Centres to:

1. if the parties elect to divest Karingal Hub, ensure that Karingal Hub is sold to an ACCC-approved purchaser
2. from the control date (the date the merger completes), ensure that Novion complies with its obligations in the Novion undertaking
3. create or strengthen a viable, effective, stand-alone independent and long-term competitor for the supply of shopping centre amenities to customers in South East Melbourne
4. ensure the purchaser of Karingal Hub has all the necessary associated assets and rights to effectively compete with the merged entity
5. maintain the economic viability, marketability, competitiveness and goodwill of Karingal Hub prior to any divestiture, and
6. provide for the effective oversight of Federation Centre’s and Federation Manager’s compliance with the undertaking.

A copy and a description of the Novion undertaking can be found as a separate entry on the Public Registers website.