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[2018] ZACT 8
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DRDGOLD Limited v Sibanye Gold Limited, trading as Sibanye-Stillwater (LM254Dec17) [2018] ZACT 8 (28 February 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM254Dec17
In the matter between
DRDGOLD
Limited
Primary Acquiring Firm
And
Sibanye
Gold Limited, trading as Sibanye-Stillwater
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Medi Mokuena (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard on
: 7 February 2018 Order
Issued on
: 7 February 2018
Reasons Issued on
: 26 February 2018
REASONS
FOR DECISION
Approval
[1]
On
7 February 2018, the Competition Tribunal ("the Tribunal")
conditionally approved the proposed transaction between
DRDGOLD
Limited ("DRDGOLD") and Sibanye Gold Limited, trading as
Sibanye-Stillwater ("Sibanye-Stillwater''). The
reasons for the
approval follow.
Parties
to the transaction and their activities
[2]
DRDGOLD
is not controlled by any firm however, it controls a number of
entities in South Africa. DRDGOLD is a mid-tier, unhedged
gold
producer and is involved in the recovery of gold through the
retreatment of surface tailings. Essentially, DRDGOLD deploys
its
resources to extract as much gold as possible from its surface
resource. It also produces silver as a by-product of its gold
operations.
[3]
Sibanye-
Stillwater controls a number of entities in South Africa. The
entities relevant to the proposed transaction are certain
assets of
the tailings retreatment business under the West Rand Tailings
Retreatment Project, hereinafter referred to as 'Selected
Assets'.
Sibanye-Stillwater is a precious metals mining company which owns and
operates gold and platinum group metals. Of relevance
to the proposed
transaction is its gold operations. In addition, Sibanye-Stillwater
produces silver as a by-product.
Proposed
transaction
[4]
In
terms of the proposed transaction, DRDGOLD intends to acquire the
Selected Assets from Sibanye-Stillwater. In exchange for the
acquisition, DRDGOLD will offer 38% of its issued share capital; and
grant Sibanye Stillwater a call option to acquire additional
shares, which could result in Sibanye-Stillwater having a
shareholding of 50.1% in DRDGOLD.
[5]
The
acquisition of an approximate 38% shareholding grants
Sibanye-Stillwater
de facto
control
over DRDGOLD. However, Sibanye-Stillwater would cross the bright line
and assume
de jure
control
over DRDGOLD in the event that it exercised the call option.
Relevant
markets and impact on competition
[6]
The Competition Commission ("the Commission") considered
the activities
of the merging parties and identified a horizontal
overlap in the following markets: (i) the international market for
the production
and supply of gold; (ii) the international market for
the production and supply of silver. The Commission found that the
merging
parties will have a combined post- merger market share of
less than 5% in the respective markets. The Commission submitted that
there are other firms in the relevant markets that are able to
exercise competitive restraints against the merged entity. The
Commission thus concluded that the proposed transaction is unlikely
to substantially prevent or lessen competition within the relevant
markets.
[7]
At the hearing the merging parties confirmed that they were seeking
approval for both
the acquisition of the 38% as well as for the call
option, provided it
is
exercised within a stipulated period.
The merging parties submitted that the call option would be exercised
within 24 months after
date of implementation of the transaction. The
Commission considered the time frame and was of the view that 24
months was reasonable
as the market conditions are unlikely to have
changed significantly and the exercise of the call option would not
require notification.
Prior cases with similar call options have
imposed an 18 month period but in this instance, an additional 6
months will unlikely
influence material changes in the market
conditions, considering the merging parties are not large players in
the relevant markets.
The Commission however, thought it necessary
for certainty that we approve the proposed transaction subject to the
condition that
in the event that the merging parties exercised the
call option after 24 months from the approval date, they should
notify same
to the Commission. The merging parties were in agreement
with this stance.
Public
interest
[8]
The merging parties submitted that the proposed transaction will not
result in any
adverse effect on employment. Furthermore, the merging
parties confirmed that the employees' share ownership agreement will
not
be negatively affected as a result of the proposed
transaction.
[1]
The Commission concluded that the proposed transaction is unlikely to
raise any employment or other public interest concerns.
Conclusion
[9]
In light of the above, we conclude that the proposed transaction is
unlikely to substantially
prevent or lessen competition in any
relevant market. In addition, no public interest issues arise.
Accordingly, we approve the
proposed transaction with the conditions
attached to our order as Annexure
"A".
Ms Yasmin Carrim
26 February
2018
Mrs
Medi Mokuena and Ms Andiswa Ndoni concurring.
Tribunal
Researcher:
Hlumelo Vazi
For
the merging parties:
For the Commission:
A
Burger Smidt of Werksmans: B Mabatamela
[1]
See page 539 of merger record.