About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2014
>>
[2014] ZACT 29
|
|
Glencore International AG v Optimum Coal Purchase Rights held by BHP Billiton Energy Coal South Africa (Pty) Ltd (018010) [2014] ZACT 29 (17 January 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case
No.: 018010
In the matter between
Glencore
International
AG
Primary Acquiring Firm
And
Optimum
Coal Purchase Rights Held
by
Primary Target Firm
BHP
Billiton Energy Coal South Africa (Proprietary) Limited
Panel : Norman
Manoim (Presiding Member) Medi Mokuena (Tribunal Member) Andiswa
Ndoni (Tribunal Member)
18
December 2013 18 December 2013 17 January 2014
Reasons for Decision
Approval
[1]
On 18 December 2013 the Competition Tribunal (“Tribunal”)
unconditionally approved the merger between
Glencore International AG
(“GIAG”) and The Optimum Coal Purchase Rights held by BHP
Billiton Energy Coal South Africa
(Proprietary) Limited (“BECSA”).
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
[3]
The primary acquiring firm is GIAG a company incorporated in
accordance with the laws of Switzerland and is controlled
by Glencore
Xstrata Pic. (“Glencore”). Glencore is a public company
headquarters in Switzerland and whose shares are
listed on the
London, Hong Kong and Johannesburg Securities Exchanges. Glencore’s
shares are widely dispersed among a number
of shareholders and
[4]
Glencore is not directly or indirectly controlled by any firm.
Glencore conducts its activities in the mining, smelting,
processing,
marketing and trading of metals and minerals, energy products and
agricultural products. It operates on a global scale,
marketing
physical commodities that it either produces itself using its own
industrial assets or that it obtains from third parties
for onward
sale to various industrial customers.
The
primary target firm is the assets comprising of the rights and
obligations of BECSA under an agreement for the supply of export
coal
from Optimum Coal Mine (Pty) Ltd (“OCM”) (‘the Coal
Purchase Agreement”)(“CPA”) and under
an agreement
for the management, administration and utilisation of Optimum’s
RBCT export allocation.
Fdzfdnfzgngfnngfffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffxznazetdjaretjareyjmaryjwarykjwtywryktykrysaryjsyr6ysjtr6rstajsartjrsatjargthnsrthtr.
Proposed
transaction and rationale
[6]
The proposed transaction involves the sale, cession and delegation by
BECSA to GIAG of ali BECSA’s rights,
title and interest to the
following:
•
The
Coal Purchase Agreement concluded by BECSA with certain subsidiaries
of Optimum on 12 September 2007.
•
The RCBT Entitlement
Management Agreement (“RCBT Agreement”) concluded by
BECSA concluded by BECSA with certain Optimum’s
counterparties
on 12 September 2007.
[7]
The
proposed transaction will allow Glencore to market the coal produced
at Optimum Colliery, which it owns. We were informed at
the hearing
that as the owner of the Optimum, Glencore has a superior ability to
understand the technical, geological and other
factors affecting the
mine’s production. The transaction is therefore more valuable
to Glencore than BECSA.
[1]
[8]
Fdzfdnfzgngfnngfffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffxznazetdjaretjareyjmaryjwarykjwtywryktykrysaryjsyr6ysjtr6rstajsartjrsatjargthnsrthtFdzfdnfzgngfnngffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffxznazetdjaretjareyjmaryjwarykjwtywryktykrysaryjsyr6ysjtr6rstajsartjrsatjargthnsrthtr.Fdzfdnfzgngfnngfffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffffxznazetdjaretjareyjmaryjwarykjwtywryktykrysaryjsyr6ysjtr6rstajsartjrsatjargthnsrthtr.r.
[8]
i
Competition
assessment
[9]
The
proposed transaction results in a horizontal overlap in the
international market for the production and export sales of thermal
coal.
[2]
[10]The
overlap arises as a result of Glencore producing and supplying
thermal coal, and the coal offtake rights relate to the production
and supply of export coal from the Optimum quarries. Also, through
its subsidiary, Glencore is a shareholder at Richard’s
Bay Coal
Terminal, and BECSA is also a shareholder at the Richard’s Bay
Terminal. As such the proposed transaction is tied
to the Richard’s
Bay Coal Terminal export entitlement for the export of thermal
coal.
[3]
[11]In
relation to the overlap, the Commission came to a conclusion that the
overlap raises no competition concerns as the post
merger market
share of Glencore in the international market will be less than 14%,
with a market share accretion of less than 1%.
[4]
Views
of market participants
[12]The
Commission received concerns from Eskom and South African Breweries
(“SAB”) pertaining to the proposed transaction.
Since
Eskom and SAB’s concerns were similar, we shall deal with
Eskom’s concerns to cover both concerns. Eskom was
concerned
that the proposed transaction would detrimental to the domestic coal
consumers, because post-merger Glencore will have
market power and
thus have the ability to divert coal allocated to domestic customers
such as Eskom, to the export market.
[5]
Export prices are considerably higher than those that can be obtained
on the domestic market.
[13]The
Commission assessed Eskom’s concerns and submitted that the
proposed transaction will not have any negative impact
on the
domestic market for thermal coal. This is because the proposed
transaction does not grant Glencore any additional export
capacity,
as the current off-take coal is already being exported, and it will
simply be purchased by Glencore instead of BEGSA
post-merger.
[6]
Furthermore, “spare capacity” that will be created by the
proposed transaction is too negligible to afford Glencore
the ability
to increase its export of thermal coal.
[7]
[14]Also,
during the hearing the Merging parties confirmed that whether or not
the proposed transaction goes ahead, the coal at
Optimum would still
go to the export market as long as export prices exceed those of the
domestic market.
[8]
[15]During
the hearing the Merging parties also submitted that the off take coal
at Optimum is an export grade which exceeds the
grade of coal that
Eskom uses at any of its power stations. The type of coai used by
Eskom and the type of coal exported by BECSA
are therefore not in the
same market.
[9]
[16]Effectively
this transaction is not about the acquisition of export allocation
rights. The export allocation is tied to the
particular volumes that
are supplied in terms of the CPA long-term contract between BECSA and
(“OCM”).
Public
interest
[17]The
proposed transaction will have no adverse effect on employment as
post merger nothing will change in respect of the production
profile
of Optimum
[10]
in any way. Furthermore, the proposed transaction raises no other
public interest concerns.
[11]
Conclusion
[18]We
are satisfied with the findings of the Commission and thus approve
the merger unconditionally.
17
January 2014
DATE
Mr.
Norman
Manoim
Ms.
Medi Mokuena and Ms. Andiswa Ndoni concurring
Tribunal
Researcher: Caroline Sserufusa
For
the merging parties: Paul Cleland of Werksmans Attorneys
For
the Commission: Tshegofatso Radinku
2
See para 4.1 page 44 of the Merger record.
[1]
See para 20 page 12 of the Transcript of hearing.
[2]
See pages 16-17 of the Commission’s Report.
[3]
See para 20 page 5 of the Transcript of hearing.
[4]
See para 10 page 6 of Transcript of hearing.
[5]
See page 755 of the Merger record in correspondence between Eskom
and the Commission dated 13 November 2013.
[6]
See pages 736-739 in a letter from Merging parties to the Commission
addressing Eskom’s concerns, dated 26 November
2013.
[7]
See para20 page 7 of the Transcript of the hearing.
[8]
See para 10 page 11 of the Transcript of the hearing.
[9]
See para 20 page 10 of the Transcript of the hearing.
[10]
See para 5 page 15 of the Transcript of the hearing.
[11]
See page 59 of Merger record.
i