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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:98/LM/Oct12
In the matter between:
Sasol Holdings USA (Pty) Ltd
Acquiring Firm
And
Merichem Company
Target Firm
Panel : Norman Manoim (Presiding Member)
Taki Madima (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 19 December 2012
Order issued on : 19 December 2012
Reasons issued on : 13 February 2013
Reasons for Decision
Approval
[1] On 19 December 2012 the Competition Tribunal (“ Tribunal”)
unconditionally approved the merger between Sasol H oldings USA
(Pty) Ltd (“Sasol USA”) and Merichem Company (“Meri chem”). The
reasons for approval follow below.
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The Transaction
[2] The primary acquiring firm is Sasol Holdings (USA) (Pty) Ltd, which has
its principal business address at 1 Sturdee Avenue Rosebank,
Johannesburg. Sasol USA is ultimately controlled by Sasol Limited
(“Sasol”), a public company listed in the Johannesb urg Securities
Exchange Limited (“JSE”) and New York Stock Exchang e (“NYSE”)
that is not controlled by any shareholder.
[3] Sasol is energy and chemicals group of companie s, which add value to
coal, oil and gas reserves, using these feedstocks to make liquid fuel,
fuel components and chemicals through Sasol’s uniqu e proprietary
technologies.
[4] The primary target firm is Merisol Merichem Com pany (“Merichem”),
which has its principal place of business at 5455 O ld Spanish Trail
Houston, Texas 77023, USA. Merichem is selling vari ous partnership
interests and issued shares that it has in the Meri sol Joint venture
(“Merisol”), (“transferred firm), to Sasol USA.
[5] Merisol is a joint venture established in 1997 between Merichem and
Sasol. Merisol is involved in the manufacturing, ma rketing and sale of
phenolic products (cresylic acid and phenol product s). Phenolic
products are organic compounds used as input materi als in a wide
range of chemical intermediates and finished produc ts including resins,
wire enamel solvents and antioxidants.
The Rationale
[6] The merging parties indicate that, for Sasol, t he acquisition of Merisol
represents an opportunity for Sasol to purchase the partnership
interests and shares in Merisol which it does not a lready own for
commercially reasonable price. In addition, Merisol is currently a
purchaser of certain feedstock products from Sasol, which are a by-
product of Sasol’s synthetic fuels production. Acco rdingly, the
acquisition of Merisol will allow Sasol to secure t he future off-take of
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these by products, and therefore also secure Sasol’ s synthetic fuel
production.
[7] Merichem wishes to sell its interest in Merisol in order to realise value
for the business, as it no longer considers Merisol to be a core part of
Merichem’s overall business strategy. Merichem is a global technology
provider to the refining and petrochemical industri es and as such,
licenses patended process technologies and supplies proprietary
equipment to provide hydrocarbon treating solutions and by-product
management services that remove sulphur and other i mpurities from
hydrocarbon liquids and gases in the upstream and d ownstream
energy sectors.
[8] The investment in Merisol is an investment in c hemical manufacturing
which is not a core business of Merichem. Merichem therefore wishes
to divest of its Merisol investment in order to foc us on Merichem’s core
proprietary process licensing business strategies.
The relevant market and the impact on competition
[9] The Commission found that the proposed transact ion does not result in
horizontal overlap between the activities of the me rging parties.
However, there is a vertical relationship between t he activities of the
parties in that currently Sasol supplies Merisol wi th two feedstock
products for the manufacture of phelonic products, namely, low neutral
dosage tar acid (LNO-DTA) and tar acid. Sasol is th e only supplier of
LNTDA and tar acid while Merisol is the only manufa cture of Phenol,
HBTA, MP45 and blended cresylic acid in South Afric a. There are no
regular or sustained purchases by Sasol of any products from Merisol.
[10] The Commission found that there were no vertic al foreclosure (input
and customer) concerns presented by this transactio n since the parties
do not have competitors in either the upstream or d ownstream
markets. Furthermore, the Commission found that Sas ol was pre-
merger unconstrained by Merichem in setting prices. The move from
merger unconstrained by Merichem in setting prices. The move from
joint control to sole control will therefore make n o difference to the pre-
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merger pricing. No customer expressed any concerns to the
Commission about the merger.
CONCLUSION
[11] There are no significant public interest issue s and we accordingly
agree with the Commission’s approach and approve th e transaction
without conditions.
____________________ 13 February 2013
N Manoim DATE
T Madima and M Mokuena concurring.
Tribunal Researcher: Thabani Ngilande
For the merging parties:
Webber Wentzel
For the Commission: Mogau Aphane