COMPETITION TRIBUNAL REPUBLIC OF SOUTH AFRICA
Case No: 58/LM/Oct01
In the large merger between:
Acerinox S.A
and
Newco ( a consortium comprising Highveld Steel & Vanadium Corporation Ltd, Samancor
Ltd and the Industrial Development Corporation of South Africa )
In re : Columbus Stainless
Reasons for the Competition Tribunal’s decision
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 28 November 2001 approving
without conditions the merger between Acerinox S.A and Newco. The reasons for our decision to
approve the merger are set out below.
The Merger Transaction
Highveld Steel & Vanadium Corporation Ltd (“Highveld”), Samancor Ltd and the Industrial
Development Corporation of South Africa (IDC) are equal partners in Columbus Joint Venture, an
unincorporated partnership trading as Columbus Stainless. The partners will transfer the business of
Columbus Stainless into Newco, a shelf company, pursuant to which Acinerox will acquire a major
share in Newco.
Upon implementation of the transfer of the business to Newco, Acerinox shall acquire 64% of the
issued share capital of Newco in equal shares from each of the three partners. Highveld, Samancor
and the IDC will each hold 12% of the issued share capital.
The merging parties submit that the transaction will improve the company’s competitiveness in
respect of international markets because Columbus will gain technological advantages. The
acquisition will also ensure direct foreign investment in Columbus bringing about further capital
expansion, technical assistance in the manufacturing processes, access to Acerinox’s distribution
network, market information and intelligence and access to technology and skills.
Evaluating the Merger
The relevant market
Acerinox is a Spanish stainless steel producer and Columbus is the sole producer in the South
African domestic market. Both parties sell their products globally as well as in South Africa, where
Columbus sells 25% of its production and Acerinox less than 1% of its production.
Both merging parties manufacture stainless steel. The product market can be divided into four narrow markets,
i.e. cold rolled or hot rolled Austentic stainless steel and cold rolled or hot rolled Ferritic steel1.
The market shares of the merging parties in South Africa are as follows:
PRODUCT COLUMBUS ACERINOX
Austentic:
Cold rolled 90% Less than 2%
Hot rolled 90% Less than 2%
Ferritic
Cold rolled 90% Less than 2%
Hot rolled 90% -
Columbus provides 90% of the stainless steel market in South Africa the remaining 10% is imported. We are not
certain if the market is an international or national market with import competition. The parties themselves did
not satisfactorily answer this question at the hearing.2However, we do not have to decide this, as nothing turns on
the precise definition of the geographic market.
Even if we regard the market as a national one, the effect of the transaction on the national market is minimal
1
2
given Acerinox’s insignificant South African market share. The effect in the global market for stainless steel
where the combined market share post merger would be 7.9% is also and does not raise competition concerns
given the fact that there are eight other international competitors.
Public Interest
The merger does not raise any of the public interest concerns enumerated in section 26(3).
16 January 2002
N.M Manoim Date
Concurring: C. Qunta and P.E Maponya
Austentic stainless steel is chromium and nickel based alloy with low carbon content and Ferritic steel is chromium
based steel with a low carbon content. Both products can be divided into hot rolled steel and cold rolled steel, which
cannot be substituted for each other.
We were provided with several overseas analysts reports, which generally treat the market as an international one,
although at the same time refer to national markets. Certainly the import tariff on the product is low , 5 %.