COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 07/LM/FEB04
In the large merger between:
Zelpy 1734 (Pty) Ltd
and
Metallurg South Africa (Pty) Ltd
Reasons for Decision
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Approval
1. On 3 March 2004 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Zelpy 1734 (Pty) Ltd and
Metallurg South Africa (Pty) Ltd in terms of section 16(2)(a). The reasons
for the approval of the merger appear below.
The Transaction
2. The transaction is a management buyout, with RMB financing the
management consortium.
3. This is essentially a two part transaction. In the first leg, the parent
company, Metallurg Europe (“ME”) will sell all its shares in and claims
against the target firm, Metallurg SA (“MSA”) to Corvest 2 Pty Ltd. Corvest
2 is RMB’s investment vehicle. In the second leg of the transaction Zelpy
1734 will acquire the business and assets of MSA, as a going concern.
The Parties
4. The primary acquiring firm Zelpy 1734 (Pty) Ltd (“Zelpy”) is a special
purpose vehicle. It’s shareholders are a consortium of the current MSA
management and Corvest 5 (Pty) Ltd. Corvest 5 is a subsidiary of RMB
Corvest Limited. RMB Corvest is a member of the FirstRand Group of
companies.
5. The primary target firm is Metallurg South Africa (Pty) Ltd (“MSA”). MSA is
a wholly owned subsidiary of Metallurg Europe. The ultimate holding
company is Metallurg Inc.
Rationale for the Transaction
6. Metallurg Europe has decided to sell MSA, its best performing asset,
because it requires the funds. The current management of MSA were
eager to purchase the business.
Evaluating the merger
The Relevant Market
7. MSA is described as a ” trader of ferrous alloys, pure metals, nickel and
magnesium, refractories, various chemicals and consumables” in the
metallurgical industry. It has four separately managed business divisions:
i) Nonferrous division
This division sells various types of primary and secondary
aluminium, nonferrous foundries, nickel (used in the electroplating
industry) and other products such as arsenic, selenium and
antimony.
ii) Refractory division
The refractory division sells insulating bricks to the cement industry
and the steel works, as well as related nonasbestos products for
insulation and ceramic fibre products. The division also specialises
in products and services associated with rotarykiln operations.
iii) Foundry division
This division sells base metals, various ferro alloys (including ferro
chrome, ferro silicon and ferro manganese) and moulding products.
iv) Speciality division
This division sells products used in the steel works, welding and
opthalmic industries. In respect of the steel works, the products
include cored wire and nickel. Products sold to the welding industry
include various metal based powders (eg. iron & chromium
powder). The opthalmic industry purchases polishing pads and
polishing compounds used for spectacle lenses.
8. RMB does not have interests in any businesses that are
active in any of the above markets.
9. There is no product overlap between the activities of MSA
and Corvest or `any of the other FirstRand subsidiaries.
Zelpy is shelf company with no trading history.
10. Thus there is no need to define a relevant market.
Impact on competition
11.Since there is no product overlap or vertical integration the merger will not
have an effect on the competitive environment. MSA will not exit the
market, thus the transaction does not result in a change in the market
structure.
Public interest issues
12.The parties submit that all the current employees of MSA will be
transferred to the primary acquirer. Accordingly, the transaction will not
impact negatively on employment.
Conclusion
13.We conclude that the merger will not lead to a substantial lessening of
competition. There are no employment or other public interest concerns,
which would alter this finding. The merger is therefore unconditionally
approved.
_____________ 11 March 2003
D. Lewis Date
Concurring: N. Manoim, T. Orleyn.
For the merging parties: Cliffe Dekker Attorneys
For the Commission: M van Hoven and S Nunkoo, Competition
Commission