COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 73/LM/Aug06
In the matter between:
MAINSTREET 432 (PTY) LTD Acquiring Firm
and
KOORNFONTEIN MINE Target Firm
_______________________________________________________________
Panel : D Lewis (Presiding Member), M Moerane (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 04 December 2006
Delivered on : 04 December 2006
REASONS FOR APPROVAL
Approval
[1] On 04 December 2006, the Competition Tribunal unconditionally
approved the proposed merger between Main Street 432 (Pty) Ltd (“Main Street
432”) and Koornfontein Mine (“Koornfontein Mine”).
The parties and the merger transaction
[2] Main Street 432 is a newly formed black owned shelf company. Main
Street 431 (Pty) Ltd (“Main Street 431”) 1 and Investec Private Bank (“Investec”)
and Coronation (“Coronation”) are the preand postacquisition shareholders in
Main Street 432. 2 Postmerger Main Street 431 will exercise control over Main
Street 432 whilst both Investec and Coronation (notwithstanding their 48,998%
shareholding in Main Street 432) will not be entitled to exercise any form of
control whatsoever. 3
[3] Koornfontein Mine is a business division of Ingwe Collieries Ltd (“Ingwe
Collieries”), which in turn is controlled by BHP Billiton (“BHPB”). 4
[4] The proposed transaction entails the acquisition of Koornfontein Mine by
Main Street 432 (from Ingwe Collieries) as a going concern. 5 The business
1 Main Street 431 (also referred to by the merging parties as “BEE Co”) is jointly controlled by
AKA Resources (Pty) Ltd (“AKA Resources”) and Siyanda Resources (Pty) Ltd (“Siyanda
Resources”) each holding a 30% shareholding in Main Street 431. The other Main Street 431
shareholders are: Ilitha Resources (Pty) Ltd (5%); Indyebo Investments (Pty) Ltd (7%); Inkwali
Engineering Services (Pty) Ltd (10%); Koornfontein Mine Employees (8%); and Ngwane (10%).
Siyanda Resources is controlled by its management (as to 55% and comprises Lindani Bennet
Mthwa, Mzwandile Nombewu, Xolile Mazabane and Siyanda Trust); Investec SA (as to 25%);
Siyanda Employees (10%); and Women’s Group (10%) ( See page 735736 of the merger
record). AKA Capital (Pty) Ltd holds 80% of the shares in AKA Resources whilst Wilrich
Schroeder and Anton Botha hold 10% each of the remaining 20% shares in AKA Resources.
2 Main Street 431 holds 50.002% of the entire issued share capital in Main Street 432 whilst
2 Main Street 431 holds 50.002% of the entire issued share capital in Main Street 432 whilst
Investec and Coronation equally hold the remaining shareholding of 49.998% in Main Street
432.
3 See page 2, paragraph 1.1, of the Commission Recommendation.
4 In other words, BHP Billiton (“BHP Billition”), through its Ingwe Collieries Ltd subsidiary in
South Africa, holds a 100% interest in the Koornfontein coal mine ( see page 493 of the merger
record).
5 See in this regard, the Notarial Sale of Business Agreement entered into between Ingwe
Collieries and Main Street 432, in particular clauses 1.2.9 and 4 (i.e., pages 44 and 72 of the
merger record ).
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being acquired comprises the coal exploration, development, mining,
beneficiation and transportation business carried on by Ingwe Collieries under
the name and style of Koornfontein Mine. 6
[5] Postacquisition, Koornfontein Mine will be owned and operated by Main
Street 432. 7
Rationale for the transaction
[6] According to Main Street 432, the proposed transaction gives all of the
primary acquiring firms the ideal opportunity to diversify their investment
portfolios.8 According to BHP Billiton, the target firm (i.e., Koornfontein Mine) no
longer constitutes a core asset within the BHP Billiton Energy Coal portfolio and
as a result of this Ingwe Collieries wishes to dispose of Koornfontein. 9 The key
factors supporting the exit of BHP Billiton Energy Coal from Koornfontein Mine
are amongst others that the BHP Billiton Energy Coal’s strategy is to
concentrate on the international seaborne market and it has no desire to
develop a small, Eskom only mine. BHP Billiton is also of the view that the
proposed deal will count towards BHP Billiton’s BEE scorecard credits that BHP
Billiton must obtain as required by the SocioEconomic Empowerment Charter
for the South African Mining Industry. 10
6 Koornfontein Mine is situated in the Mpumalanga Province approximately 45 kilometres south
east of Witbank.
7 See page 31, paragraph 11.6, of the merger record.
8 See page 331 of the merger record, i.e., paragraph 3.2.3 of the merging parties’
competitiveness report.
9 See page 29, paragraph 11.1, of the merger record.
10 See a document entitled “Memorandum – Proposed Divestment of Koornfontein coal mine” ,
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The relevant market
[7] Main Street 432 is a newly formed shelf entity for the purposes of this
transaction, and has never traded.
[8] Siyanda Business Management is an investment holding company
whose main purpose is to pursue investment opportunities in various sectors. 11
The merging parties advised us that Siyanda Business Management does not
provide any products or services, and has no controlling interests in any other
thermal coal producer in South Africa. 12
[9] AKA Capital , which holds the majority of the shares in AKA Resources
which will hold 30% in Main Street 432 postacquisition, is an investment
holding whose main purpose is substantially similar to that of Siyanda Business
Management. AKA Capital does not have a controlling interest in any firm which
is involved in the thermal coal business in this country. AKA Capital has
interests in Corobrik (a brick manufacturer); Datacentrix (a JSE listed IT
company focusing on supply, integration, support and maintenance of IT
infrastructure, the provision of IT services and solutions); Murray & Roberts
Cementation (whose main business is mine development, contract mining and
mining services); Nampak (a packaging company); Nedbank (a financial
services institution); Protea Hotels Group; and SAVCIO (a provider of
maintenance and repair services for rotating electrical equipment and
transformers).13
[10] Old Mutual Group , which holds 60% and 20% interests in Nedbank and
Old Mutual respectively, is an international financial services group which
focuses on assets gathering and management and provides a wide range of
activities in South Africa and abroad. Old Mutual Life Assurance Company
South Africa Ltd (“OMLACSA”), a subsidiary of Old Mutual Ltd, has 0.263%
interest in Kumba Resources Ltd (“Kumba Resources”). Kumba Resources is
pages 493495 of the merger record .
11 Siyanda Resources, one of the entities which will hold 30% in Koornfontein Mine, has a
number of stakes in a number of companies, viz., a controlling stake in Dense Media Separation
Powders; 2% in the Two Rivers Platinum Mine; 51% in Lephaka Mining (Pty) Ltd (a mine
engineering company that provides, on contract, support and underground excavation
protection); 60% in Concrete Lining Products (Pty) Ltd (a supplier of ready mix material that is
packaged for underground civil works); 26% in Siyanda Chrome (a joint venture with Anglo
Platinum); a Memorandum of Understanding for a joint venture arrangement with Rustenburg
Platinum Mines (Pty) Ltd to produce chrome fines from tailings); and a 50% interest in a joint
venture known as “Imigodi”, which relates to the provision of consulting engineering services.
Read Swatman & Voigt (Pty) Ltd is the other 50% shareholder in Imigodi. See an email from
Ms. Natalie Browne of Cliffe Dekker Inc. to the Commission, page 878 of the merger record .
12 See page 33, paragraph 14.2, of the merger record.
13 See pages 878879 of the merger record.
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active in the coal producing sector. As a result, the Commission concluded that
it is unnecessary to consider the impact that may arise due to OMLACSA’s
interest in Kumba Resources because such an interest is a minor one which
does not give rise to any form of control in Kumba Resources. 14
[11] Koornfontein Mine is a coal mine which produces steam/thermal coal, a
type of bituminous (or hard) coal used to generate electricity or produce
synthetic fuels.
[12] According to the Commission, no overlap exists in the activities of the
merging firms because the acquiring firm (a newly formed entity with no
operations at the moment) together with its associated companies are not
involved in the production of thermal coal for the use in the generation of
electricity or to produce synthetic fuels.
Competition analysis
[13] Given the detailed information above and our finding on the product
overlap, we need not analyse the competitive effect of the proposed transaction
any further. We simply observe that no change in the current structure (thermal
coal market) is envisaged postacquisition.
Public Interest
[14] The merging parties initially indicated that there would be a negative
impact on employment postmerger given that a maximum of 152 (132 mining
14 See page 4, paragraph 6.1, of the Commission Recommendation.
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employees and 20 engineering employees) would be retrenched as a direct
result of the proposed merger. It was also anticipated that a maximum of 240
contract workers (being predominantly drivers for the transportation of coal)
would also be affected by the proposed merger. However, the merging parties
also indicated that these 240 contract employees were likely to be relocated to
provide transport services at other mines and that 14 new positions were likely
to be opened in the services side of the Koornfontein Mine. This would have
resulted in a worstcase scenario of a maximum of 378 employees being
negatively affected by the proposed transaction. 15
[15] Following this, the National Union of Mineworkers (“NUM”) engaged the
Commission and objected to the approval of the proposed merger pending their
employment concerns being addressed by the merging parties. In brief, NUM
objected to the proposed transaction on the basis that there was no guarantee
of the future of the Koornfontein Mine in the short term and secondly, that no
workers had been provided with guarantees regarding the new employer’s
(Main Street 432’s) ability to pay what was due to the workers as provided for by
section 197 of the labour relations Act 66 of 1995, as amended (“the LRA”). 16
[16] Further to various correspondences between NUM and the merging
parties, in particular the meeting between NUM and Main Street 432 on
15 See pages 1315 of the merger record.
16 With regard to this specific issue, please see NUM’s letter addressed to the Commission
dated 28 September 2006 (that is, pages 847851 of the merger record.
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Saturday 4 November 2006, both NUM and Main Street 432 reached an
agreement on the following principles. Firstly, compulsory retrenchments are
being frozen; secondly Main Street 432 acknowledges the current agreements
between NUM and Ingwe Collieries by countersigning them; 17 and thirdly, Main
Street 432 will further extend the agreement for a further two (2) years in terms
of section 197(8) of the LRA thereby resulting in four (4) years posttransfer
liability. The parties also committed themselves to signing an Ingwe Collieries,
Main Street 432 and Union tripartite agreement capturing the agreed principles.
NUM further agreed to withdraw its objection to the proposed transaction and
now supports the proposed transaction pending the signing of the aforesaid
agreements.18
[17] Main Street 432 has since then met with the Commission on Monday 6
November 2006 and confirms in writing to the Commission its firm commitment
to the above agreed principles between itself and NUM. 19
Conclusion
[18] We accordingly endorse the Commission’s view that the proposed
transaction is unlikely to result in the substantial prevention or lessening of
competition in the relevant markets, and that the public interest issues which
17 These are the agreements entered into between NUM and Ingwe Collieries dated 24 June
2003, as amended by an agreement dated 17 July 2006, in relation to the Koornfontein Mine.
18 See a letter from NUM to the Commission dated 6 November 2006, i.e., pages 880881 of
the merger record.
19 See Main Street 432 letter to the Commission dated 13 November 2006, i.e., page 882 of the
merger record.
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were at stake have been fully and amicably addressed. We accordingly approve
the proposed transaction unconditionally.
_______________
D Lewis
Presiding Member
M Moerane and M Mokuena concurring.
Tribunal Researcher: T Masithulela
For the merging parties : N Browne ( Cliffe Dekker Inc. )
For the Commission : E Ramohlola assisted by M Mohlala
(Mergers & Acquisitions)
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