COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 05/LM/Jan09
In the matter between:
Rio Tinto / Rio Tinto Ltd and Acquiring Firms
BHP Billiton South Africa Holdings BV
And
Richards Bay Mining (Pty) Ltd and Target Firms
Richards Bay Titanium
Panel : N Manoim (Presiding Member), U Bhoola (Tribunal
Member) and M Mokuena (Tribunal Member)
Heard on : 11 March 2009
Order issued on : 11 March 2009
Reasons issued on : 06 May 2009
Reasons for Decision
Introduction
[1] On 11 March 2009 the Tribunal unconditionally approved the acquisition by
Rio Tinto Plc and Rio Tinto Ltd and BHP Billiton South Africa Holdings BV of
Richards Bay Mining (Pty) Ltd and Richards Bay Titanium (Pty) Ltd. The
reasons follow below.
The Parties
[2] The primary acquiring firms are Rio Tinto Plc and Rio Tinto Ltd (“herein after
referred to as Rio Tinto”), through Rio Tinto International Holdings (“RTIH”)
and BHP Billiton South Africa Holdings BV (“hereinafter referred to as BHP
Billiton Holdings BV”). Rio Tinto Plc and Rio Tinto Ltd are listed on the United
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Kingdom and Australian Stock Exchanges respectively, and as such no firm
controls Rio Tinto.1
[3] BHP Billiton Holdings BV is controlled by BHP Billiton Ltd, which is in turn
controlled by BHP Billiton Plc (“BHP Billiton”). BHP Billiton Plc and BHP
Billiton Ltd are also listed on the United Kingdom and Australian Stock
Exchanges respectively, and as such no firm controls BHP Billiton.
[4] The primary target firms are Richards Bay Mining (Pty) Ltd (“Tisand Opco”)
and Richards Bay Titanium (Pty) Ltd (“RBIT Opco”), shelf companies
established for purposes of this transaction. Both firms will be jointly
controlled by BHP Billiton and Rio Tinto.
Description of the transaction
[5] This transaction entails a restructuring of BHP Billiton and Rio Tinto’s interest
in Richards Bay Minerals (“RBM” – in which both firms have a 50-50 joint
venture) in order to facilitate the introduction of Black Economic
Empowerment shareholders. RBM comprises of two entities, i.e. Richards
Bay Iron and Titanium (Pty) Ltd (“RBIT”) and Tisand (Pty) Ltd (“Tisand”).
[6] As part of this restructuring, Rio Tinto through its holding company RTIH and
BHP Billiton Holdings BV will incorporate two South African Holding
companies namely RBIT Holdco and Tisand Holdco.
[7] The shares in Tisand Holdco will be held as to 51% by the BHP Group
through BHP Billiton Holdings BV and as to 49% by the Rio Tinto Group
through RTIH. The shares in RBIT Holdco will be held as to 51% by the Rio
Tinto Group through RTIH and as to 49% by the BHP Billiton Group through
BHP Billiton Holdings BV.
[8] In addition, Tisand Holdco, a BEE consortium (“BEE Holdco”) and an
Employee Share Participation Scheme (“ESPS”) will incorporate a South
African operating company to which the business currently held by Tisand will
1 Rio Tinto also has 80% interest in QIT Madagascar Minerals (“QMM”). The remaining 20%
1 Rio Tinto also has 80% interest in QIT Madagascar Minerals (“QMM”). The remaining 20%
is held by the government of Madagascar. QMM started producing zircon in January 2009.
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be transferred to Tisand Opco, in which they will have the following
shareholding: Tisand Holdco 74%, BEE Holdco 24% and the ESPS 2%.
[9] RBIT Holdco, BEE Holdco and the ESPS will also incorporate a South African
operating company to which the business currently held by RBIT will be
transferred to RBIT Opco, in which they will have the following shareholding:
RBIT Holdco 74%, BEE Holdco 24% and the ESPS 2%. Upon implementation
of the restructuring, BHP Billiton and Rio Tinto will have joint control in Tisand
Opco and RBIT Opco.
Rationale
[10] According to the merging parties, this transaction represents an opportunity
for RBM to meet its BEE obligation as well as to resolve various commercial
issues, including disagreements over marketing between BHP Billiton and Rio
Tinto in relation to RBM.
Parties’ Activities
[11] Both BHP Billiton and Rio Tinto are international mining and resources
companies with interests and operations in a broad of resources including
aluminium raw materials and products, thermal and metallurgical coal, iron
ore, copper, diamonds, gold etc.
[12] As indicated above, the merging parties have a 50%-50% joint venture in
Richards Bay Minerals (“RBM”), which comprises of two entities, i.e. Richards
Bay Iron and Titanium (Pty) Ltd (“RBIT”) and Tisand (Pty) Ltd (“Tisand”).
Tisand operates a mine that produces ilmenite, rutile and zircon. RBIT owns
and operates a smelter which smelts and beneficiates the ilmenite transferred
to it from Tisand to produce titania slag and nodular pig iron.
[13] Tisand Opco and RBIT Opco are newly established companies and do not
currently conduct any business.
Effect on Competition
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[14] This transaction constitutes a restructuring process which will result in the
rearrangement of the marketing agreement relating to all RBM products, i.e.
rutile, zircon, titanium slag and nodular pig iron. Currently all rutile and zircon
production of RBM is independently marketed by Tisand, whilst all titania slag
and nodular pig iron is marketed by RTIT.2
[15] Upon implementation of the restructuring Rio Tinto will be responsible for the
marketing of all RBM’s products. The transaction is therefore unlikely to
substantially prevent or lessen competition in the affected markets.
Public Interest
[16] The transaction does not raise any significant public interest concerns.
___________ 06 May 2009
N Manoim Date
U Bhoola and M Mokuena concurring.
Tribunal Researcher : I Selaledi
For the merging parties : Edward Nathan Sonnenbergs Inc.
For the Commission : X Nokele
2 RTIT had from the outset assumed marketing responsibilities of all RBM’s products by virtue
of exclusive sales agency agreements between BHP and Rio Tinto with common terms.
These agreements came to an end in 2006. However, the parties decided to reinstate RTIT
as the marketer of all RBM products
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