*P444'.0'
COMPETITION TRIBUNAL OF SOUTH AFRICA
In the matter between:
ISIZINDA ALUMINIUM (PTY) LTD
And
THE BAYSIDE CASTHOUSE
Case No: LM179Jan15/020503
Acquiring Firm
Target Firm
OPERATION OF BILLITON ALUMINIUM SA (PTY) LTD
Panel
Heard on
Order Issued on
Reasons Issued on
: Medi Mokuena (Presiding Member)
: Fiona Tregenna (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
: 6 May 2015
6 May 2015
: 3 June 2015
Reasons for Decision
Approval
[1] On 6 May 2015, the Competition Tribunal ("Tribunal") unconditionally approved the
merger between IsiZinda Aluminium (Pty) Ltd ("IsiZinda") and The Bayside
Casthouse Operation of Billiton Aluminium SA (Pty) Ltd ("Bayside Casthouse").
[2] The reasons for approving the proposed transaction follow.
1
Parties to transaction and their Activities
Primary acquiring firm
[3] The primary acquiring firm is IsiZinda, a company incorporated in accordance with
the laws of the Republic of South Africa. IsiZinda is jointly controlled by Bingelela
Capital (Pty) Ltd ("Bingelela") (60%) and Hulamin Ltd ("Hulamin") (40%). IsiZinda
does not control any firm. Bingelela is
Neither Bingelela
nor its shareholders control any firm. Hulamin is a public company listed on the
Johannesburg Securities Exchange ("JSE") and is not controlled by any finm. 1 In
addition to IsiZinda, Hulamin controls Hulamin Operations (Pty) Ltd ("Hulamin
Operations") which controls Hulamin Extrusions (Pty) Ltd ("Hulamin Extrusions"). 2
[4] IsiZinda is a newly formed company, incorporated specifically for the proposed
transaction. It does not conduct any operations. Bingelela is a consortium of four
companies with complementary skills ranging from industrial operations to project
funding. However, neither Bingelela nor its shareholders conduct any operations.
Hulamin produces a range of aluminium flat rolled products and aluminium extrusions
from its plant located in Pietermaritzburg, Kwa-Zulu Natal and Midrand, Gauteng and
supported by sales offices across the globe.
Primary target firm
[5] The primary target firm is the Bayside Casthouse which is controlled by Bayside, a
wholly-owned subsidiary of BHP Billiton SA Holdings Limited ("BHP Billiton SA"). 3
BHP Billiton SA is controlled by BHP Billiton Plc ("BHP Billiton"), a company
incorporated in accordance with the laws of the United Kingdom.
[6] The Bayside Casthouse is the sole producer of aluminium rolling slab in South Africa
and supplies it exclusively to Hulamin.
Hulamin's major shareholders as at 31 December 2013 include: Industrial Development Corporation
(29.63%), Coronation Fund Managers (10.04%), Old Mutual Group Limited (7.43%) and Investec
Group Limited (5.33%). 2 Hulamin Operations is divided into Hulamin Rolled Products and Hulamin Containers.
3 Forthe purposes of the proposed transaction, the Bayside Casthouse includes the slab casthouse, a
warehouse, a number of ancillary buildings and laydown area which is incorporated into the Bayside
footprint of 17.2 hectares located in Richards Bay and KwaZulu-Natal.
2
Proposed transaction and rationale:
[7] The proposed transaction comprises of two steps which will ultimately result in
IsiZinda acquiring the Bayside Casthouse from BHP Billiton as a going concern.
[8] IsiZinda's submitted rationale is that acquiring the Bayside Casthouse will ensure a
continued supply of rolling slab to Hulamin and will assist it in integrating a BBBEE
company in the transaction.
However, the proposed
transaction presents an opportunity to ensure that the Bayside Casthouse continues
to operate as a stand-alone supplier of rolling slab in South Africa.
Impact on Competition:
[9] The Competition Commission ("Commission") considered the activities of the
merging parties to determine whether there were any horizontal and/or vertical
overlaps. As stated above, IsiZinda is a newly formed entity incorporated for the
proposed transaction and as such does not conduct any business operations.
Bingelela is currently non-operational whilst Hulamin produces a range of aluminium
flat rolled products and aluminium extrusions. In terms of the target firm, the Bayside
Casthouse procures liquid aluminium from Hillside in order to produce aluminium
rolling slab which it supplies exclusively to Hulamin. The Commission found that the
merging parties' products and/or services are not substitutable and thus there is no
horizontal overlap between them.
[10] However, the Commission found that a vertical relationship exists between the
merging parties as the Bayside Casthouse supplies its aluminium rolling slab
exclusively to Hulamin. In assessing the potential foreclosure concerns, the
Commission found that pre-merger Hulamin is Bayside Casthouse's only customer.
This position will remain unchanged post-merger. Further, there is no other producer
of aluminium rolling slab in South Africa. The Commission accordingly concluded that
this vertical relationship does not give rise to any vertical foreclosure concerns.
this vertical relationship does not give rise to any vertical foreclosure concerns.
[11] On this basis, the Commission concluded that the proposed transaction is unlikely to
substantially lessen or prevent competition in any market.
3
Public interest:
[12] The Commission considered public interest concerns that Richards Bay Industrial
Development Zone Co. SOC Limited ("RBIDZ") raised. RBIDZ informed the
Commission that, it intends to establish a downstream metals hub in the Richards
Bay area, which will focus on aluminium and titanium. RBIDZ was concerned that
the proposed transaction would affect the availability of a sustainable supply of
competitively priced liquid aluminium to small and medium enterprises, which wish to
enter the market. Given these concerns, the Commission contacted the National
Union of Metal Workers of South Africa ("NUMSA") and the Department of Trade and
Industry ("DTI") to obtain their views. Although a meeting took place between the
Commission, NUMSA and the DTI, neither NUMSA nor the DTI made any further
submissions. 4
[13] The Commission ultimately found that none of the issues raised by RIBIDZ, NUMSA
or the DTI were merger-specific and that the proposed transaction will not affect the
manner in which the industry currently operates. Prior and post-transaction, Hulamin
remains the only customer of the Bayside Casthouse for rolling slab. The
Commission found no evidence of any new entrant, which would require rolling slab
from IsiZinda. Further, the acquisition of the Bayside Casthouse will ensure that there
is a continued supply of rolling slab to Hulamin so as to ensure that it remains viable
in the downstream aluminium industry. 5
[14] In relation to employment, the Commission found that the proposed transaction
would have a positive effect because it would result in 78 jobs being saved. Without
the merger, these employees would be retrenched as the Bayside Casthouse would
be forced to close down.
[15] The Commission accordingly concluded that the proposed merger is unlikely to raise
any substantial public interest grounds and should be approved unconditionally.
Conclusion:
[16] In light of the above, we agree with the Commission's analysis and conclude that the
[16] In light of the above, we agree with the Commission's analysis and conclude that the
proposed transaction is unlikely to substantially prevent or lessen competition in the
relevant market. In addition, no public interest issues arise from the proposed
transaction.
4 Transcript page 18.
5 Transcript page 5-6.
4
03 June 2015
DATE Medi Mokuena
Fiona Tregenna and Andiswa Ndoni
Tribunal Researcher:
For the merging parties:
For the Commission:
Ammara Cachalia
Ryan Goodman, ENS Africa and Paul Cleland
Werksmans Attorneys
Zanele Hadebe
5