COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 41/LM/May05
In the large merger between:
Lonmin Plc Acquiring Firm
And
Southern Platinum Corp Target Firm
Reasons for Decision
Approval
On 8 June 2005 the Competition Tribunal conditionally approved the transaction between
Lonmin Plc and Southern Platinum Corp. The reasons for this decision follow.
The Transaction
The Parties to the transaction
1. The primary acquiring firm is Lonmin Plc (“Lonmin”). Lonmin is listed on the London Stock
Exchange and has no controlling shareholder. Lonmin has the following subsidiaries 1
i. 100% shareholding in Lonmin Investments Canada Inc (“Lonmin Investments”);
ii.82% of the issued share capital of Western Platinum Ltd and Eastern Platinum Ltd
(collectively known as “Lonplats”). 2
2. The primary target firm is Southern Platinum Corp (“South Plats”). South Plats owns 100%
of the issued shares in Southern Platinum (Cayman Islands) Ltd and has a joint venture with
Mvelaphanda Resources Ltd known as the Messina Platinum JV. South Plats has interests
in the following firms:
i.Messina Ltd (“Messina”);
ii.Messina Platinum Mines Ltd (“MPML”);
iii.SouthernEra Mining and Exploration SA (Pty) Ltd (“SEMEX”);
iv.Societe Gabonaise de Development Minier;
v.Gabon Mining Corporation. 3
The structure of the transaction
3. Lonmin will acquire the entire issued share capital of South Plats, South Plats (Cayman
Islands), Messina and MPML by way of a takeover bid.
1 A full list of Lonmin’s subsidiaries can be found on page 145 of the record.
2 The remaining 18% of Lonplats is owned by Incwala Resources (Pty) Ltd.
3 See page 3 of the Commission's Report for the structure of South Plats.
Transaction Rationale
4. According to the parties, the Messina Platinum Project, which is located in the Bushveld
Igneous Complex in South Africa, is an “ailing mining operation in dire financial straits”. The
lenders to MPML have requested it to find a suitable technical partner with financial capacity
to assist Messina.
The Parties’ activities
5. All the parties are involved in the Platinum Group Metals (PGMs) sector. Six metals make up
the PGMs viz. palladium, platinum, iridium, osmium, rhodium and ruthenium. Lonmin is the
third largest primary producer of PGMs in the world and has mining interests in South Africa
through its interest in Lonplats. Lonmin is also involved in the refining and smelting of
PGMs.
6. Southplats is also a primary producer of PGMs. Messina is involved in the development of
platinum mineral rights held by MPML. MPML operates the Messina Platinum Project, which
covers mineral leases in Voorspoed, Doornvlei and Zebediela. Theses mines are situated in
the Bushveld Igneous Complex in the Limpopo Province. According to the parties, the
Bushveld Igneous Complex is the largest PGM depository in the world.
7. According to the Commission's Report, the transaction has both horizontal and vertical
effects. Horizontally, the parties overlap in the market for the production of PGMs, while the
vertical dimension of the transaction involves a refiner and smelter of PGMs acquiring a
producer of PGMs.
8. As we’ve noted in our previous decisions 4 in this sector, there is a degree of substitutability
within the PGM range of metals.
“However the 1996 European Commission report on the proposed merger of
the platinum interests of Gencor (viz. Implats) and Lonrho (viz. LPD)
(henceforth 'the GencorLonrho report') found that PGMs do not constitute a
single relevant market but rather six relevant markets, each comprising the
various members of the platinum group of metals… Although subsequent
developments may indicate a greater degree of substitutability between
platinum and palladium in the manufacture of autocatalysts than that
suggested in the EC report, we are confident that the relevant markets
identified by the European Commission remain valid… 5
9. The Commission similarly defined separate markets for platinum, palladium, rhodium,
4 Rustenburg Platinum Mines and Eastern Platinum Mines Ltd "Pandora Joint Venture" and Rustenburg
Platinum Mines Ltd Case No: 55/LM/Aug02; Two Rivers Platinum Limited And Assmang Limited No: 54//;
Rustenburg Platinum Mines Ltd & The royal Bafokeng Nation in their capacity as the Participants in the
"Bafokeng Rasimone Joint Venture" and Rustenburg Platinum Mines Ltd and the Royal Bafokeng Nation
No: 78/LM/Oct02
5 At paragraph 9 of "Bafokeng Rasimone Joint Venture" referred to in the previous footnote.
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iridium, ruthenium and osmium, and was of the view that the relevant geographic market
was international in all the above product markets.
Impact on competition
Horizontal impact
10. The global market shares provided by the parties were based on 2003/2004 supply figures
and while we are concerned that more current figures were not provided, especially
considering the nature of merger activity in the PGM sector, we nevertheless accept the
Commission’s submission that the increment in market share in all the relevant markets is
relatively low. 6 Furthermore, the merged entity faces competition from larger players such
as Anglo American Platinum, Impala Platinum, Norilsk Nickel (Russia) and Aquarius
Platinum.7
Vertical impact
11. As stated above, Lonmin is involved in the refining and smelting of PGMs. Messina does not
have its own smelting and refining operations and premerger, it’s smelting and refining was
contracted to Impala Refining Services in terms of an offtake agreement. According to the
parties, this agreement will terminate in June 2006, and the concentrate produced at
Messina will be refined and smelted at Lonmin’s facilities.
12. According to the Commission, the volume of concentrates that Impala refines and smelts for
Messina is insignificant. Furthermore, Impala has consented to the termination of the
agreement. In the Commission’s view, the transaction does not raise any vertical foreclosure
concerns. We agree with the Commission in this regard.
Public Interest
13. According to the parties, the financial state of the Messina mining operations made it
unsustainable and absent the merger, approximately 1532 jobs would be at risk. Post
merger, however, with Lonmin’s intervention, the number of retrenchments would be
substantially reduced and approximately 284 semiskilled workers and 116 workers at
management, artisan, supervisor and administrator levels might be retrenched (worsecase
scenario). The parties submitted that the planned retrenchments could be attributed to the
transition to a safer productive mining method, changed working timetables and the
reduction of high operating costs (labour costs constitute more than 60% of the premerger
total cost of Messina). 8
14. The Commission was of the view that the retrenchments planned were still substantial and
together with the parties agreed on a set of conditions. However, it appeared from the
record that the unions representing the employees at Messina Mine had not been consulted
6 Messina’s market share in the platinum, rhodium and palladium markets is below 1%. Messina
accounts for 1% of the ruthenium and iridium markets.
7 See page 29 of the record.
8 See page 1012 of the record and page 911 of the Commission's Report.
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during the drafting of the condition. Accordingly the Tribunal asked the parties to send
copies of the Commission's recommendation to the various unions for them to consider the
proposed conditions and make submissions in relation to these. The parties subsequently
furnished us with letters from the unions which all stated that they had accepted the
conditions. Furthermore, we requested that the various union representatives be present at
the hearing on 8 June 2005. At the hearing, the union representatives confirmed their
acceptance of the conditions.
15. The transaction was approved subject to the following conditions:
i) The maximum number of employees to be retrenched as a result of the proposed merger
shall be approximately 284 semiskilled employees and approximately 116 employees at
the management, artisan, supervisor and administrator levels, provided that in total there
shall not be more than 400 retrenchments.
ii) At least a quarter of the retrenched employees shall be short listed for appropriate
positions that become available within the Lonmin Group or elsewhere.
iii) The merged entity shall offer alternative skills training, as agreed with the relevant trade
unions, to employees who are retrenched as a result of the proposed merger. Such skills
training will be available for a period of six months from the date on which notice of the
retrenchments is given to the relevant trade unions. The merged entity must ensure that
the training commences prior to the effective date of the retrenchments.
iv) The merged entity shall pay the costs of the alternative skills training offered by the
merged entity, including accommodation and two meals a day.
The conditions will endure for a period of 24 months from the date of the issue of the clearance
certificate by the Competition Tribunal .9
certificate by the Competition Tribunal .9
16. We also requested the parties to provide us with more detail on the nature of the skills
training they would offer. According to the parties, 10 the courses it would offer were
bricklaying, electrical house wiring, welding and electronic appliance maintenance.
17. We are satisfied that the conditions deal with any concerns arising out of this merger.
22 July 2005
Y Carrim Date
Concurring: M Holden and M Madlanga
For the merging parties: N Brown and J Meijer (Cliffe Dekker)
9 Contained in the merger order issued on 8 June 2005
10 In a correspondence dated 8 June 2005.
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For the Commission: H Ratshisusu (Mergers and Acquisitions)
For the Trade Unions: M Leshilo (BMEAWU, Mpumalanga)
J Showale (BMEAWU, Messina)
G Mphela (NUM, South Plats)
T Mokgophi (NUM, Messina Plats)
J Scheepers (UASA, Mpumalanga)
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