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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 56/LM/ Aug09
In the matter between:
International Mineral Resources BV Acquiring Firm
And
Kermas South Africa (Pty) Ltd; and Target Firms
Samancor Chrome Limited
Panel : Y Carrim (Presiding Member )
N Theron (Tribunal Member)
A Wessels (Tribunal Member)
Heard on : 07/10/2009
Order issued on : 07/10/2009
Reasons issued on : 29/01/2010
Reasons for Decision
Approval
[1] On 7 October 2009 the Competition Tribunal (“Tribunal”) unconditionally
approved the merger between International Mineral Resources BV and Kermas
South Africa (Pty) Ltd. 1 The reasons for approval follow below.
The transaction
[2] The primary acquiring firm is International Mineral Resources BV (“IMR”), a
company incorporated in accordance with the laws of the Netherlands, which is
controlled by CIM Global Investment BV (“CIM Global”). I n South Africa CIM
Global holds shares in IMR South Africa (51%); Capstone South Africa (54%);
1 Samancor Chrome Limited is a wholly owned subsidiary of Kermas South Africa (Pty) Ltd.
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and Kermas South Africa (32.5%). Capstone South Africa controls Rosal 126
(Pty) Ltd, which in turn controls Shaft Sinkers (Pty) Ltd (“Shaft Sinkers”). IMR’s
main interest in South Africa is its indirect shareholding in Shaft Sinkers.
[3] The primary target firms are Kermas South Africa (Pty) Ltd (“Kermas SA”) and its
wholly owned subsidiary Samancor Chrome Limited (“Samancor Chrome”);
companies registered under the laws of the Republic of South Africa. Samancor
Chrome is Kermas SA’s only business interest in South Africa. The shares in
Kermas SA are held by: IMR (39.5%); Kermas Limited 2 (34.5%); Vollmet 3 (3%);
and other shareholders (23%). Samancor Chrome holds interests in various
entities.
[4] In April 2006 the Tribunal unconditionally approved a merger involving IMR’s
acquisition of 32.5% of the issued shares in Kermas SA, which gave IMR and
Kermas Limited joint control of Kermas SA (and consequently of Samancor
Chrome).4 Subsequently, IMR acquired a further 7% shareholding in Kermas SA
held indirectly through Batho Barena Investments Holdings (Pty) Ltd, which is
held purely in a warehousing capacity after the previous BEE shareholders
disposed of their shares, and which will be dealt with in accordance with the
Department of Minerals’ directions. As a result of this, IMR currently has a 39.5%
shareholding in Kermas SA.
[5] In the instant transaction, IMR seeks to acquire an additional 34.5%
shareholding in Kermas SA currently held by Kermas Limited, which will give IMR
sole control of Kermas SA with a total shareholding of 74% (including the above
mentioned warehoused 7%).
Rationale for the transaction
[6] For IMR the proposed transaction is part of its wider global objective, and is an
[6] For IMR the proposed transaction is part of its wider global objective, and is an
opportunity to pursue a more comprehensive investment and capacity utilisation
policy in respect to Kermas SA and Samancor Chrome. According to Kermas, the
2 A company incorporated under the laws of the British Virgin Islands.
3 A Swiss entity. The merging parties indicated that IMR is in the process of acquiring Vollmet’s 3%
shareholding in Kermas SA.
4 Case No. 03/LM/Jan06.
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proposed transaction is an investment return, the proceeds of which will be used
to participate in various other ventures and opportunities.
Merging parties and their activities
[7] There is no horizontal overlap between the activities of the merging parties in
South Africa.
[8] The relevant activities of IMR in South Africa are limited to the business of Shaft
Sinkers which is primarily involved in the sinking of mine shafts. 5 Kermas SA’s
only business activities in South Africa relate to the business of Samancor
Chrome which is a vertically integrated ferrochrome producer, with chrome mines
in Limpopo, Mpumalanga and the North West Province. 6 The relevant activities of
Samancor Chrome in the context of this assessment relate to the mining of
chromium ore.
Vertical relationship
[9] There is a vertical relationship between the merging parties in that Samancor
Chrome may post merger utilise the services rendered by Shaft Sinkers in its
mining of chrome ore operations. At present, Shaft Sinkers provides its services
to third parties other than Samancor Chrome; Samancor Chrome currently does
its sinking of shafts inhouse.
[10] The Commission considered the merging parties’ market positions in a national
market for the sinking of shafts (upstream market) and a national market for the
production (i.e. mining) of chromium ore (downstream market). According to the
merging parties, Shaft sinkers has a [1020]% market share in a national market
for shaft sinking, where it faces competition from Murray & Roberts Cementation
5 Shaft Sinkers provides underground contracting services, including predominantly the sinking of
shafts (either vertical or decline), developing and constructing mining and underground civil
infrastructure (including hydroelectrical, pump storage, underground caverns and nuclear waste
storage facilities), contract mining for select clients, and the design of underground shafts and
associated infrastructure.
6 In addition Samancor Chrome is active in smelting operations of chromium ore to produce
ferrochrome and in the production and distribution of electrode paste.
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(>40% market share), JIC Mining Services (>20% market share), Redpath (>5%
market share) and Grinaker LTA (>5% market share). According to the merging
parties, Samancor Chrome has a [2030]% market share in a national market for
the production of chromium ore, and competes with players such as Xstrata
Merafe (>30% market share) and a number of smaller competitors, including
Hernic, Assmang, IFM, Lanxess and ASA.
[11] Based on the above, potential post merger input or customer foreclosure as a
result of the proposed transaction is highly unlikely.
Third party request for adjournment
[12] On 2 October 2009, the Tribunal received a letter from Christian Schoeman
(“Schoeman”), a representative of two companies 7, namely Merlin Resources
Limited (“Merlin UK”) 8 and Hugh Brown and Associates (Pty) Ltd (“HB&A”) 9. The
letter informed the Tribunal that Merlin UK and HB&A have substantial
interrelated financial claims against Kermas Limited. The letter also mentioned
that an ex parte interim order for the attachment of all the shares of Kermas
Limited in Kermas SA was granted on 29 September 2009 in the South Gauteng
(Johannesburg) Division of the High Court in connection with the aforesaid
claims.10
[13] Schoeman requested to have the merger proceedings adjourned sine die on
the basis that it would be a futile exercise to make a decision on the transfer of
shares in the current merger proceedings, when such share transfer cannot take
place until either the actions by Merlin UK and HB&A have been concluded in the
High Court or the said attachment of shares lifted.
[14] We dismissed Schoeman’s application for the adjournment of the merger
proceedings on the following grounds: The Tribunal’s powers are limited to that
set out in the Competition Act, 1998 (Act No. 89 of 1998). 11 I n a merger context
set out in the Competition Act, 1998 (Act No. 89 of 1998). 11 I n a merger context
7 In his capacity as a member of these two companies.
8 Registered in terms of the company laws of England and Wales.
9 A South African registered company.
10 Decision of his Lordship Mr Justice Gildenhuys – Case number 40988/09.
11 Also see, for example, the Tribunal decision in Mapula Restaurant and CocaCola Fortune (Pty)
Ltd; Case No: 91/CR/Aug07, at para 35.
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we are only empowered to consider the competition and public interest effects of
a proposed merger, i.e. whether or not the merger is likely to substantially
prevent or lessen competition and/or raise public interest concerns. More
specifically, section 12A of the Act directs the competition authorities to take “ into
account any factor that is relevant to competition in that market ” and to determine
“whether a merger can or cannot be justified on public interest grounds”. At the
hearing Schoeman made it clear that the issues of Merlin UK and HB&A are not
grounded in competition or public interest concerns, but arise purely from their
commercial interests. He stated that he is not “ suggesting in any way that the
recommendations of the Commission [that] this transaction be granted is in any
way incorrect on whatever basis. I merely say that it has the effect of dissipating
the value on my security ”.
[15] Furthermore, approval by the Tribunal of the instant transaction will not impact
the commercial interests of Merlin UK and HB&A as these interests are protected
by law. The said companies already have relief in terms of the abovementioned
interim order of the High Court. It would be a criminal offence for the merging
parties to implement the proposed transaction while the interim attachment order
is in place and that order can only be removed by the High Court. Section 40(b)
of the Supreme Court Act, 1959 (Act No. 59 of 1959) provides that any person
who “ being aware that goods are under ... attachment by the court makes away
with or disposes of those goods in a manner not authorised by law, or knowingly
permits those goods, if in his possession or under his control, to be made away
with or disposed of in such a manner...shall be guilty of an offence and liable on
conviction to a fine ...”.
CONCLUSION
[16] Based on the aforementioned competition analysis, the Tribunal concludes that
[16] Based on the aforementioned competition analysis, the Tribunal concludes that
the proposed merger is unlikely to lead to a substantial prevention or lessening of
competition in any relevant market. Furthermore, no public interest concerns
arise from the proposed deal. Therefore the proposed transaction is approved
unconditionally.
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____________________ 29/01/2010
A Wessels DATE
Y Carrim and N Theron concurring
Tribunal Researcher: Londiwe Senona
For the merging parties: Bowman Gilfillan
For the Commission: K Mahlakoana
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