COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 62/LM/Jun07
In the matter between:
Pamodzi Gold Limited Acquiring Firm
And
Orkney Business owned by
African Rainbow Minerals Gold Limited Target Firm
Panel : D Lewis (Presiding Member), N Manoim (Tribunal Member),
and L Reyburn (Tribunal Member)
Heard on : 1 August 2007
Order Issued on: 1 August 2007
Reasons Issued: 13 September 2007
Reasons for Decision
Approval
1] On 1 August 2007, the Tribunal unconditionally approved the merger between
Pamodzi Gold Limited and the Orkney Business owned by African Rainbow
Minerals Gold Limited. The reasons for approving the transaction follow.
The parties
2] The primary acquiring firm is Pamodzi Gold Limited (“Pamodzi Gold”), a
company registered in terms of the laws of the Republic of South Africa.
Pamodzi Gold is controlled by Pamodzi Resources (Pty) Ltd (“Pamodzi
Resources”) through Middevlei Gold Investments (Pty) Ltd (“Middelvlei”), Clidet
674 (Pty) Ltd and Clidet 700 (Pty) Ltd (“SPVs). 1
3] Pamodzi Resources is controlled 50.5% by Pamodzi Investment Holdings (Pty)
Ltd (“PIH”). The main shareholders of Pamodzi Resources are as follows:
[3.1] Impafa Holdings (Pty) Ltd 41.5%;
[3.2] D Horak 5%;
[3.3] H Geath 1.5%; and
[3.4] AJ Murdoch Eaton 1.5%.
4] The parties submitted that RMB Ventures Two (Pty) Ltd (“RMB Ventures”) has
joint control of PHI by virtue of certain rights conferred on it in terms of the
shareholders agreement. 2 RMB Ventures is controlled by RMB Private Equity
(Pty) Ltd, which is in turn controlled by FirstRand Bank Holdings Limited. These
companies are collectively referred to as the “FirstRand Group”.
5] Pamodzi Gold controls Pamodzi Gold West Rand (Pty) Ltd (“PG West Rand”)
and Pamodzi Gold East Rand (Pty) Ltd (“PG East Rand”). PG West Rand does
not control any firm. PG East Rand controls various companies 3 which include
Consolidated Modderfontein Mines Limited. 4
6] The primary target firm is the Orkney Business owned by African Rainbow
Minerals Gold Limited (“ARM Gold”), a company incorporated in terms of the
company laws of South Africa. ARM Gold is a wholly owned subsidiary of
Harmony Gold Mining Company Limited (“Harmony”). Harmony has in excess
of 40 subsidiaries. 5
1 Through various arrangements involving SPVs, Pamodzi Resources owns 50.17% of
Pamodzi Gold.
2 RMB Ventures has been afforded minority protections rights in terms of the shareholders
agreement. (See p2 of the Commission’s Recommendtions).
3 The companies include Grootvlei Proprietary Mines Limited; Consolidated Modderfontein
Mines Limited; Nigel Gold Mining Company (Pty) Ltd, Pretklerk Gold Mining Company (Pty)
Ltd, Pretklerk Springs Daggafontein Gold Mining Company (Pty) Ltd, and Pretklerk Marievale
Gold Mining Company (Pty) Ltd.
4 Consolidated Modderfontein Mines Limited Consolidated Modderfontein Mines 1979 Limited,
4 Consolidated Modderfontein Mines Limited Consolidated Modderfontein Mines 1979 Limited,
and Modderfontein SeventyFour (Pty) Ltd.
5 See Annex H submitted by the parties.
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7] ARM Gold owns 50% in ARM Gold/ Harmony Joint Venture Company (Pty) Ltd
and ARM Gold/ Harmony Joint Investment Company (Pty) Ltd.
Description of the transaction
8] In terms of the transaction, ARM Gold will transfer its entire Orkney business as
a going concern into Clidet 759 (Pty) Ltd (“Newco”). 6 Newco is a wholly owned
subsidiary of Harmony, which has been incorporated for the sole purpose of
acquiring the entire business of Orkney pursuant to this transaction.
9] Pamodzi Gold will acquire 100% of the issued share capital of Newco from
Harmony. As a result, Pamodzi will acquire ownership of the Orkney business
and assets. 7
Rationale for the transaction
10] Pamodzi Gold submitted that this transaction provides it with an opportunity to
acquire mining assets at an attractive valuation and that the senior gold miners
are incentivised, in terms of the Minerals and Petroleum Resources
Development Act and the Mining Charter, to sell at least 26% of their equity to
historically disadvantaged South African owned companies.
11] ARM Gold perceives the transaction as fitting perfectly with Harmony’s strategy
of rebalancing its portfolio with the sale of shorter life and higher cost assets
when compared with its other operations.
The parties’ activities
12] The FirstRand Group is involved in the provision of a variety of banking
services that are not relevant for the purposes of these reasons. 8
6 See copy of Notarial Sale of Business Agreement in the further submissions of the parties.
7 See copy of Notarial Sale of Shares Agreement in the further submissions of the parties.
8 The services provided by the FirstRand Group include retail banking, instalment credit
finance, merchant banking, corporate banking, mortgage lending, private banking, short term
insurance, internet banking, wealth cluster, health cluster, and vehicle finance.
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13] Pamodzi Gold produces gold bullion bars with a purity of between 80%85%.
14] ARM Gold also produces gold bullion bars with a purity of between 80% and
85%.
The relevant market
15] In line with the Tribunal’s previous decisions, 9 the Commission defined the
relevant market as the international market for the production and supply of
gold.
Competition analysis
16] The Commission submitted that the merging parties will have a post merger
market share of 2.32%. This market share is very small and does not raise
competition concerns. We therefore, agree with the Commission that this
transaction is unlikely to substantially prevent or lessen competition in the
implicated markets.
Public Interest
17] There are no public interest issues.
Conclusion
18] The merger is approved unconditionally.
________________ 13 September 2007
D Lewis DATE
Presiding Member
N Manoim and L Reyburn concur in the judgment of D Lewis
Tribunal Researcher : R Kariga
9 Cf Harmony Gold Mining Company Limited and African Rainbow Minerals Gold Limited
Tribunal Case 25/LM/May03; and Anglogold Limited and Driefontein Consolidated (Pty) Ltd
Tribunal Case 66/LM/Nov03.
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For the merging parties: N J Browne, Cliffe Dekker Attorneys
For the Commission : L Madihlaba and M Mohlala (Mergers and
Acquisitions)
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