COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 63/LM/Sep02
In the large merger between:
Silicon Technology (Pty) Ltd
and
Calcium Carbide Division of Sentrachem Limited
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Reasons for Decision
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Approval
On 6 November 2002 we unconditionally approved the merger between Silicon
Technology (Pty) Ltd and Sentrachem Limited in respect of Sentrachem Limited’s
Calcium Carbide Division. The reasons for our decision follow.
The transaction
This transaction entails an acquisition by Silicon Technology (“Siltech”) of certain
businesses from Sentrachem Limited (“Sentrachem”). Siltech will acquire the acetylene
carbon black and calcium carbide businesses of Sentrachem as going concerns. The sale
constitutes one indivisible transaction.
The primary acquiring firm is Siltech, a private company subsidiary of Lion Invest AG,
ultimately controlled by Glencore International AG.
The primary target firms are the businesses of Sentrachem, a subsidiary of the Dow
Chemical Company.
Sentrachem is disposing of all its noncore businesses hence this transaction.
Evaluating the merger
Siltech produces “75% Ferrosilicon”, an alloy of iron and silicon, as well as its by
products, ferrosilicon slag and silica fume. However, its parent company, Glencore, is
widely involved in the mining, smelting, refining and processing of metals and minerals.
In South Africa, Glencore also produces anthracite.
Sentrachem is the only producer of calcium carbide in South Africa. Calcium carbide is
manufactured from anthracite, pitch coke, metallurgical coke, lime dolomite and
electricity. It is used extensively as a desulphuriser in the steel and metallurgical industry,
in the manufacture of calcium cyanide and acetylene for the welding and cutting
industries. The sale of calcium carbide as a desulphuriser constitutes approximately 50%
of the turnover of this part of the target business.
Sentrachem’s acetylene carbon black business uses calcium carbide to produce high
purity elemental acetylene carbon black (“ACB”). ACB is distinguishable from the
carbon black, which is used in manufacture of automobile tyres. At the hearing the parties
submitted that ACB is currently not imported and the only customer for ACB in South
Africa is Gillette, which manufactures zinc carbide batteries. Sentrachem has an
evergreen supply contract with Gillette, which is subject to annual price negotiation.
It is clear that the products produced by the acquirer and those produced by the target
businesses are not substitutable and do not compete in the same market. Although there is
no product overlap between the merging parties, the transaction does give rise to vertical
integration since the target company consumes anthracite in its production process and
the acquiring group produces anthracite. In fact, the target purchases 50% of its anthracite
requirements from the acquiring group and the remaining part thereof from the Ingwe
Coal Group.
Coal Group.
However, the target company’s purchases from the acquiring group constitute less than
1% of the total market. Furthermore, the extent of this vertical integration is substantially
diluted by the fact that the target company’s purchase of anthracite is determined by the
actual properties of the anthracite that is required. Thus foreclosure of this market is
unlikely because the target requires a particular blend of anthracite that the acquiring
group, by itself, cannot provide.
Public interest concerns
The transaction will not impact negatively on employment.
Conclusion
We conclude that the merger will not lead to a substantial lessening of competition. The
Tribunal therefore approves the transaction unconditionally. There are no public interest
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concerns, which would alter this conclusion.
15 January 2003
N. Manoim Date
Concurring: F. Fourie, M. Holden
For the acquiring firm: Werksmans
For the target firm: Bell Dewar & Hall Inc.
For the Commission: J. Mokwana, Legal Services Division, Competition
Commission
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