COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 13/LM/Feb06
In the matter between:
Exxaro Limited Acquiring Firm
And
Namakwa Sands (a division of Anglo Operations Limited) Target Firm
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal
Member), and U Bhoola (Tribunal Member)
Heard on : 24 25 July 2006
Decided on : 15 August 2006
Reasons Issued: 14 September 2006
Reasons for Decision
APPROVAL
1] On 15 August 2006 the Tribunal unconditionally approved, the merger between
Exxaro Limited and Namakwa Sands (a division of Anglo Operations Limited).
Although this transaction was filed separately, it is dependent on the approval
of the merger between Mainstreet 333 (Pty) Ltd and Kumba Resources Limited
under case number 14/LM/May06. The Tribunal considered the transactions
simultaneously and both were approved unconditionally. The merger between
Mainstreet 333 (Pty) Ltd and Kumba Resources Limited is referred to as
“Project Pangolin”. The current transaction, the merger between Exxaro and
Namakwa Sands, is referred to as the “Namakwa option.” The reasons for
approving the transaction follow.
THE PARTIES
2] The primary acquiring firm is Exxaro Limited (“Exxaro”). After the completion of
Project Pangolin transaction, the major shareholder in Exxaro will BEE Holdco.
BEE Holdco will control approximately 55% of Exxaro. BEE Holdco will, in turn,
be indirectly controlled by Eyesizwe Mining, by virtue of its shareholding in
Eyesizwe SPV (the Eyesizwe SPV will hold approximately 55% in BEE Holdco)
3] The primary target firm is the Namakwa Sands Mining Business (“Namakwa
Sands”), a division of Anglo Operations Limited (“AOL”). AOL is a wholly owned
subsidiary of Anglo South Africa (Pty) Ltd, which is controlled by Anglo
American South Africa Limited (“Anglo American”). 1
4] After the completion of Project Pangolin Anglo American will own, directly or
indirectly 23% interest in Exxaro
THE TRANSACTION
5] The Namakwa option is conditional upon the completion of Project Pangolin.
The Namakwa option involves Anglo American granting Exxaro an option to
acquire firstly its Namakwa Sands division and secondly, to acquire a 26%
minority interest in its South African zinc operations, Black Mountain and
Gamsberg. This will include an option to conclude an offtake agreement which
will give Exxaro the right to zinc concentrate produced by the Black Mountain
concentrator.
6] Anglo American currently owns 100% of Namakwa Sands and has a 66%
indirect interest in Ticor SA through its interests in Kumba Resources Limited
(“Kumba”). At the completion of Project Pangolin but before the implementation
of this transaction (Namakwa option) Anglo American will still own 100% of
Namakwa Sands, but its interests in Ticor SA will have declined to 23% through
its direct or indirect economic interest in Exxaro. At the completion of this
transaction, Namakwa Sands and Ticor SA will effectively remain under
transaction, Namakwa Sands and Ticor SA will effectively remain under
1 Anglo American South Africa is in turn controlled by Anglo American International, which is
ultimately controlled by Anglo American plc.
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common ownership.
THE RATIONALE FOR THE TRANSACTION
7] The rationale in Project Pangolin is fully set out in our decision in case number
14/LM/Feb06 and it is not necessary for us to repeat it in this decision. The
Namakwa option furthers the empowerment objectives referred to in that
decision as it expands the resource base that Anglo American is offering to
Exxaro.
COMPETITION ANALYSIS
Mineral Sands
8] The parties have submitted that there is no overlap between the operations of
the controlling shareholder of BEE Holdco (the Eyesizwe SPV and through it,
Eyesizwe Mining and Eyesizwe Holdings) and those of Namakwa Sands.
9] Anglo American effectively controls the mineral sands in this transaction
through Kumba (Via the Ticor companies 2) and Namakwa Sands. This
transaction does not lead to a substantial change of the structure of the mineral
sands market since it will result in Anglo American’s mineral sands interests,
being consolidated under the control of Exxaro and Anglo American
relinquishing control over all its current mineral sands interests. After acquiring
Anglo American’s interests in the mineral sands market, Exxaro will also
acquire Anglo American’s market share in that market. The market shares and
the number of players in the mineral sands market will thus remain the same.
Zinc
10] The Namakwa option does not raise vertical and horizontal issues in the zinc
market. At the completion of Project Pangolin, but before the exercise of the
Namakwa option, Exxaro will not have any zinc operations and will as a result
2 The Ticor companies are Ticor SA (Pty) Ltd and Ticor Limited.
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have no market share in the zinc market.
PUBLIC INTEREST ISSUES
11] There are no public interest issues.
CONCLUSION
12] The transaction will not lead to a substantial prevention or lessening of
competition. There are no public interest issues that may affect this conclusion.
________________ 14 September 2006
N Manoim DATE
Presiding Member
Y Carrim and U Bhoola concur in the judgment of N Manoim.
Tribunal Researchers: M MuruganModise and R Kariga
For the merging parties: Adv. D Unterhalter SC and Adv. J Wilson instructed by
Webber Wentzel Bowens
For the Commission : Adv. J Gauntlett SC and Adv. H Shozi instructed by the
Commission and T Kekana (Mergers and Acquisitions)
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