COMPETITION TRIBUNAL SOUTH AFRICA
Case No: 80/LM/Jul08
In the matter between:
Lexshell 99 General Trading (Pty) Ltd Acquiring firm
And
Springboklaagte Mining (Pty) Ltd Target firm
Panel : D Lewis (Presiding Member); Y Carrim (Tribunal Member) and N
Manoim (Tribunal Member)
Heard on : 17 September 2008
Decided on : 17 September 2008
Reasons Issued : 02 October 2008
Reasons for Decision
Approval
[1] On 17 September 2008 the Competition Tribunal issued a Merger Clearance
Certificate unconditionally approving the merger between Lexshell 99 General Trading (Pty)
Ltd and Springboklaagte (Pty) Ltd. The reasons appear below.
Parties
[2] The primary acquiring firm is Lexshell 99 General Trading (Pty) Ltd (“Lexshell 99”) a
company registered in terms of the laws of South Africa. Lexshell is jointly controlled by
Shanduka Coal 99 (Pty) Ltd (“Shanduka Coal”) 1 and Umcebo Holdings Mining (Pty) Ltd
(“Umcebo Mining”)2.
1 Shanduka Coal owns 100% of the issued share capital in Graspan Colliery (Pty) Ltd, which operates a coal
mine near Middelburg in terms of a notorial mineral lease and 100% of the issued shares in Wakefield
Investments (Pty) Ltd which operates coal mines in Middelburg and Kendal. Shanduka Coal is controlled by
Glencore International AG (“Glencore”), which owns 70% of the issued shares in Shanduka Coal. Glencore
controls Xstrata plc, which is a company incorporated and registered under the laws of the United Kingdom and
listed on the London and Swiss Stock exchanges. Xstrata plc owns 100% of the issued share capital of Xstrata
(Schweiz) AG, a company registered in Switzerland. Xstrata (Schweiz) owns a controlling stake (directly or
indirectly) in three main groups of companies which have the following companies as their holding companies:
Xstrata South Africa (Pty) ltd (“Xstrata SA”), Xstrata Queensland Ltd (“Xstrata Queensland”) and Falconbridge
Ltd (“Falconbridge”). Lexshell does not control any firm.2 Umcebo Mining is controlled by Umcebo Holdings (Pty)Ltd (”Umcebo Holdings”) which is ultimately controlled
Ehlobo Group (Pty)Ltd, which is in turn controlled by the LMR Trust and Bagus Family Trust. Umcebo Mining
controls Macphail Distributors, which in turn controls the following firms: Baza Coal Suppliers; Celsum 1040 (Pty)
Ltd; B&B Trust; Trackstar Trading 315 (Pty) Ltd t/a Coalbrite; Golden Palace Trading (Pty) Ltd and Golden Tattoo
Trading t/a e-Coalbrite.
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[3] The primary target firm is Springboklaagte (Pty) Ltd (“Springboklaagte”) 3 a company
registered in terms of the laws of South Africa.
Transaction
[4] The merger involves Lexshell acquiring the entire issued capital of Springboklaagte.
Rationale
[5] The parties submit that the proposed transaction is a mechanism of resolving a
conflict, which arose between Eyethu Coal (Pty) Ltd (“Eyethu”) and Xstrata SA in respect of
certain coal prospecting rights in South Africa. 4 In order to resolve the conflict arising, the
various parties referred to above agreed that:
(a) Eyethu will transfer its prospecting right, in respect of Kromdraai South Area;
Springboklaagte Area and Welterverden Area to the target firm, Springboklaagte.
(b) Lexshell 99 will acquire all the issued shares in Springboklaagte from Eyethu
(which is the subject of this filing) and the following additional coal supply
arrangements will be entered into:
(i) Springboklaagte will acquire from Eyethu coal mined from an area adjacent
to the Kromdraai South Area.
(ii) Springboklaagte will supply to a company owned by Eyethu, AKMF and
Springboklaagte coal mined from part of Kromdraai South Area;
Springboklaagte Area and Welterverden Area; and
(iii) Eyethu will supply a company owned by Eyethu and Springboklaagte coal
mined from the western part of the Kromdraai North Area.
Parties’ Activities
[6] Lexshell is a special purpose vehicle that and has not traded before. Umcebo Mining
is the holding company of a group of companies5 which companies house various aspects of
Umcebo Mining’s businesses of mining, beneficiation and distribution of coal. Shanduka
Coal owns Graspan Colliery and Wakefield, which operates coal mines near Middelburg and
3 Springboklaagte is controlled by Eyethu Coal (Pty) Ltd (“Eyethu”) with 90% of the issued share capital and the
remaining 10% is held by Anglo Khula Mining fund (Pty) Ltd (“AKMF”). Springboklaagte does not control any
other firm.4 The conflict arose because Xstrata SA holds an old prospecting right in respect of Kromdraai South Area
referred to above, and Eyethu applied to the Department of Minerals and Energy Affairs for and was awarded a
prospecting right in respect of all three properties (Kromdraai South Area; Springboklaagte Area and
Welterverden Area). Xstrata SA therefore challenged the granting of those prospecting rights to Eyethu.5 The companies are listed in annexure B to form CC4 (2) on page 34 of the record.
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Kendal. Xstrata South Africa (Pty) Ltd (“Xstrata South Africa”), is involved in the mining ,
production and sale of ferrochrome, chromite ore, vanadium pent oxide, ferrovanadium,
anthracite and thermal (steam) coal. Xstrata Queensland is involved in mining, smelting and
refining of copper, coal (thermal and coking), zinc, lead and silver. Falconbridge is an
international copper and nickel company with investments in fully integrated zinc assets.
[7] Springboklaagte only asset is thermal coal prospecting rights situated in the following
farms: Kromdraai South Area; Springboklaagte Area and Welterverden Area.
Market Definition
[8] According to the Commission there is a potential overlap in the activities of the
merging firms as the acquiring firm is involved in coal mining and the target firm owns coal
prospecting rights. We agree with the Commission’s conclusion that the relevant product
market is the market for thermal coal this is in line with a number of our previous decisions
and was not placed in dispute by the relevant parties. The geographic market is defined as
national.
Competition Analysis
[9] In its analysis the Commission found that coal mining rights of the target firm will
have an effect of increasing the acquiring firm’s market share in respect of thermal coal with
0.97% from 10.1% to 11.7% market share. In this market the Commission’s investigation
revealed that the combined firm would continue to face a number of strong, effective
competitors notably from players such as BHP Billiton, which has 22.6% market share,
Anglo Coal with 24.4%, Sasol Mining with 17.8%, Eyesizwe Coal with 9.3%, Exxaro
Resources with 7.6% market shares for thermal coal throughout the country. Therefore we
agree with the Commission’s conclusion that the proposed transaction is unlikely to raise
any competition concerns, as the parties combined market shares remains low. In addition
there are no public interest issues.
Conclusion
there are no public interest issues.
Conclusion
[10] Based on the above, we find that the transaction will not result in a substantial
lessening or prevention of competition in the identified markets and is accordingly approved
unconditionally.
___________________ 02 October 2008
N Manoim Date
Tribunal Member
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Y Carrim and D Lewis concurring
Tribunal Researcher : Jabulani Ngobeni
For the merging parties : Werksmans Attorneys
For the Commission : Kwena Mahlakoana (Mergers and Acquisitions)
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