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[2014] ZACT 50
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Air Products South Africa (Pty) Ltd v Sasol Chemical Industries Lts ("SCI") In respect of the A2100 Air Seperation Plant owned by SCI (019026) [2014] ZACT 50 (28 August 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 019026
In
the matter between;
AIR
PRODUCTS SOUTH AFRICA (PTY) LTD
Primary Acquiring Firm
And
SASOL
CHEMICAL INDUSTRIES LTD (“SCI”)
In
respect of the
A2100
AIR SEPARATION PLANT owned by
SCI
Primary Target Firm
Panel
Norman Manoim (Presiding Member)
Yasmin
Carrim (Tribunal Member)
Prof
Imraan Valodia (Tribunal Member)
Heard
on
31 July 2014
Order
Issued on 31 July 2014
Reasons
Issued on 28 August 2014
Reasons
for Decision
Approval
[1]
On 31 July 2014, the Competition
Tribunal unconditionally approved the acquisition by Air Products SA
(Pty) Ltd (“Air Products
SA”) of the A2100 Air Separation
Plant (“A21G0 Plant”) owned by SCI.
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Air
Products SA which is jointly controlled by Air Products and Chemicals
Incorporated (“APCI”)
and Remgro Limited (“Remgro”).
Remgro is a public company listed on the Johannesburg Stock Exchange
Limited (“JSE”)
and controls the following firms:
•
TTR
Holdings (Pty) Ltd;
•
TSB
Sugar Holdings Limited;
•
Wipesco
Holdings Limited; and
•
Remgro
Management Services Limited.
Air
Products SA controls the following firms:
•
APSAP
Gas Newcastle (Pty) Ltd;
•
Erfmark
(Pty) Ltd;
•
Oxy-Gen
and General (Pty) Ltd; and
•
MIA
Gas (Pty) Ltd.
Primary
target firm
[4]
The primary target firm is the A2100 Air
Separation Plant and associated air plants, storage facilities and
certain pipelines (“A2100
Plant”) owned by SCI, SCI is a
wholly-owned subsidiary of Sasol Limited ("Sasol”). Sasol
is a publically listed
company and is as such not controlled by any
firm.
Proposed
Transaction and Rationale
[5]
In terms of the Purchase and Sale
Agreement, Air Products SA shall acquire the A2100 Plant from SCI.
The A2100 Plant includes pipelines
spanning from the Air Products
SA’s Vanderbijlpark facility to Sasol’s Sasolburg
facility for the purpose of supplying
it (SCI) with the volumes
required in excess of the production off the A2100 Plant (or to
provide SCI with backup volumes in the
event of plant shutdowns).
This also includes a tributary pipeline off the main oxygen pipeline
which runs between the Air Products
SA’s Vanderbijlpark
facility and Sasol’s Sasolburg facility for the supply of
Oxygen by Air Products to Natref.
[6]
The merging parties have indicated in a
letter of intent (“Letter of Intent”) that they will
enter into negotiations
to finalise the following agreements on
mutually acceptable terms:
·
Supply agreements in terms of which Air
Products SA undertakes to supply and SCI to purchase products at the
agreed volumes and
specifications;
·
Property lease agreements in terms of which Air
Products SA shall lease the land the A2100 Plant is situated on at
the factory;
·
Utilities and service agreements in terms of
which Air Products SA undertakes to supply and SCI to purchase liquid
oxygen, liquid
nitrogen and gaseous nitrogen supplied by Air Products
SA via the pipelines from the site to the factory as backup to the
plant
at the agreed volumes and specifications.
Relevant
Market and impact on Competition
[7]
Air Products SA’s primary business
is to manufacture, supply and distribute a wide variety of industrial
and speciality gas
products and chemicals servicing,
inter
alia,
the steel, stainless steel, chemical,
petrochemical and engineering industries. Air Products SA supplies
industrial gases through
a variety of different delivery channels.
[8]
SCI
is a producer of chemicals, synthetics, and fuel co-products in South
Africa, China and Malaysia. The A2100 plant is an air
separation
plant (“ASU”) currently operated by Air Products for the
benefit of the ASU’s owner, SCI. An ASU takes
atmospheric air
and separates it into one or more of its main component gases
principally oxygen, nitrogen and/or argon. The A2100
Plant has the
following capacities: 2100 TPD
[1]
gaseous oxygen (“GOX”), 1260 TPD of gaseous nitrogen
(“GAN”), 70 TPD of liquid nitrogen (“LIN")
and
50 TPD of liquid argon (“LAR”).
[9]
Upon an assessment of the merging
parties’ activities, the Commission found that there is a
horizontal overlap in the activities
of the merging parties in the
supply of industrial gases. In the Commission’s assessment of
the relevant markets it found
there are distinct product markets,
namely (i) tonnage market supply for the supply of GAN and GOX, and
(ii) the bulk supply of
LIN and LAR.
(i)
Tonnage market for the supply of GAN and
GOX
[10]
In the tonnage market for the supply of
GAN and GOX, the Commission found that the GAN and GOX produced by
the A2100 plant are used
almost entirely by SCI and are therefore not
available to the general market, with only a negligible amount of GAN
(10 to 20 TPD)
being sold to Karbochem (Pty) Ltd (“Karbochem”),
which supply to Karbochem will continue post-merger.
(ii)
Inland regional market for the bulk
supply of UN and LAR
[11]
In the inland regional market for the
bulk supply of LIN, Air Products SA will not be accreting any market
share, as it already
has access to 45 TPD pre-merger and SCI will be
increasing its requirement of LIN from 10 TPD to 25 TPD.
[12]
In the national market for the bulk
supply of LAR, Air Products SA will have a postmerger market
share of between 55-60% with
an accretion of less than 2%. The
Commission is of the view that the market share accretion is low and
are thus unlikely to raise
any competition concerns. The negligible
volumes of LAR that was available to the open market when the A2100
Plant was still owned
by SCI wilt continue to be available
post-merger through Air Products SA. Post-merger, Air Products SA
will continue to face competition
from Air Liquide South Africa and
African Oxygen Limited (“AFROX”) and further, none of the
effected customers have
raised concerns about the transaction.
Conclusion
[13]
In light of the above we conclude that
the proposed transaction is unlikely to substantially prevent or
lessen competition in the
(i) tonnage market supply for the supply of
GAN and GOX, and (ii) the bulk supply of LIN and LAR. The Letter of
Intent further
does not contain any terms or clauses that raise
competition concerns. In addition, no public interest issues arise
from the proposed
transactions. Accordingly w^ approve the proposed
transaction unconditionally.
28
August 2014
DATE
Mr
Norman Manoim
Ms
Yasmin Carrim and Prof Imraan Valodia concurring
Tribunal
Researcher:
Derrick Bowles
For
the merging parties: Sakia
Rohi
For
the Commission:
Glementine Mahlangu and
Xolela Nokele
[1]
Tons per day.