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[2014] ZACT 75
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Fraser Alexander (Pty) Ltd v Close-Up Mining (Pty) Ltd (019570) [2014] ZACT 75 (19 November 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 019570
In the matter
between:
Fraser
Alexander (Pty)
Ltd
................................................................................
Primary
Acquiring Firm
And
Close-Up
Mining (Pty)
Ltd
......................................................................................
Primary
Target Firm
Panel: Norman Manoim
(Presiding Member),
Andiswa Ndoni
(Tribunal Member)
Imraan Valodia
(Tribunal Member)
Heard on: 05
November 2014
Order issued on: 05
November 2014
Reasons issued on :
19 November 2014
Reasons for
Decision
Approval
[1] On 05 November
2014 the Competition Tribunal (“Tribunal”)
unconditionally approved the large merger between Fraser
Alexander
(Pty) Ltd (“Fraser") and Close-Up (Pty) Ltd (“Close-Up
Mining”). The reasons for approving the
proposed transaction
follow.
Parties to
transaction
[2] The primary
acquiring firm is Fraser, a wholly-owned subsidiary of Fraser
Alexander Holdings Proprietary Limited (“FA
Holdings”),
which in turn is wholly-owned by RBH Services Holdings Proprietary
Limited, which is a wholly-owned subsidiary
of Royal Bafokeng
Holdings Proprietary Limited (“RBH”). RHB is 100% owned
by the Royal Bafokeng National Development
Trust(“RBN Trust”).
Fraser operates through various divisions namely, Fraser Alexander
Tailings (“FAT”),
Fraser Alexander Bulk Mech (“FABM”),
Fraser Alexander Mineral Processing (“FAMP”) and Fraser
Alexander
Construction (“FAC”). Fraser Alexander has only
one subsidiary, a dormant entity named Dikuno Trading Limited.
[3] For the purpose
of this transaction the relevant division of Fraser is FAC. FAC
provides civil engineering services to the mining
industry. Its main
focus lies with bulk earthworks and geotechnical structures. The
services it provides include water and material
containment sites and
structures, civil structures for waste, water and minerals; and
environmental and pollution control and civil
works.
[4] Relevant to note
for purposes of this transaction is that RBH has a shareholding in
Impala Platinum Holdings Ltd (“Impala”)
and Royal
Bafokeng Platinum Ltd (“Royal Platinum”), which are
platinum producers.
[5] The primary
target firm is Close-Up Mining, which provides open pit mining
related services on an outsourced basis. It has a
substantial fleet
of mobile equipment for moving 'topsoil and overburden and for the
mining of primary product and partings between
coal seams. Close-Up
Mining’s core competencies include on-mine road construction,
drilling, blasting and turnkey mining
projects amongst others.
Proposed
transaction and Rationale
[6]
In terms of the proposed transaction, Fraser is acquiring shares from
Close-Up shareholders comprising of up to 100% of the
shares in the
issued share capital of Close-Up Mining. This will take place in the
form of two stages with the last stage taking
place in December
2015.
1
Currently Fraser owns 16% of the issued share capital in Close-Up
Mining.
[7] Fraser submits
that the current transaction is in line with its strategy to offer
customised, integrated solutions to the mining
industry. Whilst
Close-Up Mining’s shareholders submit that they require a
strategic partner to improve the business’s
exposure to greater
number of opencast mining contracts, to enabie Close-Up Mining to
maintain its growth curve and decrease the
risk associated with its
current exposure, to allow a number of clients and a limited service
offering to its mining clients.
Competition
assessment
[8] The Commission
submitted that the proposed transaction gives rise to a horizontal
overlap in the broad market for the provision
of mining services. The
merging parties argued that the services are distinct and hence there
is no overlap as Fraser's services
are more in relation to the
development phase of mines, whilst Close- Up Mining’s services
are more in relation to open cast
mines,
[9] The Commission
submitted that even though this description of the parties’
present activities is correct nothing precludes
the merging parties
from providing each other’s services in the identified product
market. For this reason the Commission
concluded that the firms
compete in the same market albeit that it defined it more broadly.
[10] However the
Commission’s analysis revealed that in the broader market of
the provision of mining services the merged
entity will have a market
share of less than 5%. The Commission is therefore of the view that
due to the low market shares, the
proposed transaction is unlikely to
raise any competition concerns. Also, the merged entity will continue
to face competition from
other market players such as Aveng, Basil
Read and Trollope Mining Services, which offer both initial mine
development and opencast
mining services.
[11] The Commission
also assessed the transaction for potential vertical overlaps. The
Commission analysed RBH’s ownership
in Royal Platinum and
Impala, to see whether any foreclosure concerns may arise. The
Commission concluded that it was unlikely
that any foreclosure
concerns would arise as Close-Up Mining offers opencast mining,
whilst Impala and Royal Platinum are deep
underground mines.
[12] The Commission
also looked at whether any vertical concerns may arise since Close-Up
Mining has been contracted by FABM for
two contracts in relation to
loading and hauling of discarded material and top soil respectively.
The Commission came to the conclusion
that since both contracts are
for a very short period of time and since the merging parties do not
operate at the same level of
the value chain in the identified
product market, it is unlikely that any foreclosure may arise
post-merger. The Commission therefore
submits that the proposed
transaction will not substantially lessen or prevent competition in
the market for the provision of mining
services.
Public Interest
[13] The Commission
also submits that the proposed transaction does not raise any public
interest concerns.
CONCLUSION
[14] For the purpose
of this case we do not need to decide between the merging parties and
the Commission’s view of the relevant
market. Even if we accept
the Commission’s view that the firms compete in the same
market, we agree with its conclusion that
the increments are not
sufficient to raise horizontal concerns .We also agree with the
Commission’s conclusion on the vertical
and public interest
issues. In summary we conclude that the proposed transaction is
unlikely to substantially prevent or lessen
competition and thus
approve the transaction without conditions.
19 November 2014
DATE
Mr
Norman Manoim
Ms Andiswa Ndoni
and Prof. Imraan Valodia concurring.
Tribunal
Researcher:
Caroline
Sserufusa
For the merging
parties: Shawn van der Meulen for Webber Wentzel
For the Commission:
Relebohile Thabane
1
See
page 5 of the Transcript of the hearing.