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[2018] ZACT 35
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Hail Creek Coal Holdings (Pty) Ltd v Hail Creek Joint Venture and Others (LM076Jun18) [2018] ZACT 35; [2020] 2 CPLR 756 (CT) (24 July 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM076Jun18
In
the matter between:
Hail
Creek Coal Holdings (Pty) Ltd
Primary Acquiring Firm
And
Hail
Creek Joint Venture
Hail
Creek Marketing (Pty)
Ltd
Primary Target Firms
Hail
Creek Coal (Pty) Ltd
Panel
: Mr A W Wessels (Presiding Member)
: Mr Enver
Daniels (Tribunal Member)
: Prof
Fiona Tregenna (Tribunal Member)
Heard
on
: 4 July 2018
Order
Issued on : 4 July 2018
Reasons
Issued on : 24 July 2018
REASONS
FOR DECISION
Approval
[1]
On
4 July 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the acquisition by Hail Creek Coal Holdings
(Pty) Ltd ("HCC Holdings") of Hail Creek Joint Venture ("HC
Joint Venture"); Hail Creek Marketing (Pty) Ltd
("HC
Marketing"); and Hail Creek Coal (Pty) Ltd ("HC Coal").
[2]
The reasons for approving the proposed
transaction follow.
Parties to the proposed transaction and
their activities
Primary acquiring firm
[3]
The
primary acquiring firm is HCC Holdings, a special purpose vehicle
established to facilitate the current transaction and act
as a
holding company for the target firms listed below. HCC Holdings is a
wholly owned subsidiary of Glencore Coal (Pty) Ltd, which
is a wholly
owned subsidiary of Glencore Operations Australia (Pty) Ltd
("Glencore Operations"). Glencore Operations
is an indirect
subsidiary of Glencore pie ("Glencore"). Glencore is a
public company listed on the London and Johannesburg
Stock Exchanges.
[4]
Glencore
operates globally as a supplier of commodities and raw materials to
industrial customers. Of relevance to the competition
assessment of
the proposed transaction are Glencore's activities in relation to the
supply of coal, which fall under its Energy
Products business
segment.
Primary target firms
[5]
The
primary target firms are (i) HC Joint Venture; (ii) HC Marketing; and
(iii) HC Coal. Pre-merger these target firms are ultimately
controlled by Rio Tinto Limited, a multinational mining and metals
corporation.
[6]
The
target firms' activities relate to coal mining arising out of the
Hail Creek Mine, an open cast mine situated in Queensland,
Australia.
HC Coal performs the management functions of HC Joint Venture, which
owns the Hail Creek Mine, while HC Marketing is
responsible for the
marketing and sale of the thermal and metallurgical (or coking) coal
produced at this mine.
Proposed transaction
[7]
In
terms of the proposed transaction, HCC Holdings intends to acquire
82% of the issued share capital of HC Joint Venture, 82% of
the
issued share capital of HC Marketing and 100% of the issued share
capital of HC Coal. HCC Holdings may however acquire an interest
of
up to 100% in HC Joint Venture and up to 100% of the shares in HC
Marketing if the other joint venture participants exercise
their
"tag-along rights" in terms of the
Asset
Sale Agreement.
[1]
[8]
Upon
implementation of the proposed transaction, HCC Holdings will
exercise control over the target firms.
Relevant markets and impact on competition
[9]
The
Competition Commission ("Commission") considered the
activities of the merging parties and found that the proposed
transaction gives rise to horizontal overlaps in (i) the national
market for the production and supply of thermal coal; and (ii)
the
international market for the production and supply of metallurgical
or coking coal.
[10] The Tribunal
questioned the Commission and the merging parties regarding the
geographic scope of the
market for the production and supply of
metallurgical coal. The merging parties confirmed that since about
2013 all metallurgical
coal used in South Africa has been imported
into South Africa.
[2]
[11]
With
regards to the national market for the production and supply of
thermal coal, Glencore currently produces and supplies thermal
coal
in South Africa, but the target firms neither produce nor supply
thermal coal in South Africa. The Commission therefore concluded
that
the proposed transaction does not raise any geographic overlap in
relation to the production and supply of thermal coal in
South
Africa.
[12]
With
regards to the production and supply of metallurgical coal, the
Commission found that Glencore and the target firms do not
own or
operate any mine in South Africa that produces metallurgical coal.
The target firms produce metallurgical coal from the
mine located in
Australia and supply same to various customers located throughout the
world, including one customer in South Africa.
Glencore also produces
metallurgical coal from its mines located in other countries and
supplies same to customers located worldwide
including South Africa.
Furthermore, the merged entity will have a market share of below 10%
in the international market for the
production and supply of
metallurgical (or coking) coal.
[13]
Given
the above, we concur with the Commission that the proposed
transaction is unlikely to substantially prevent or lessen
competition
in the identified relevant markets.
Public
interest
[14]
The merging parties confirmed that the
proposed transaction will have no negative effect on employment in
South Africa.
[3]
[15]
The proposed transaction further raises
no other public interest concerns.
Conclusion
[16]
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 from
the proposed transaction. Accordingly, we approve the proposed
transaction unconditionally.
Mr
AW Wessels
Mr
Enver Daniels and Prof Fiona Tregenna
24 July 2018
Tribunal
Case Manager: Jonathan Thomson
For
the merging parties: Paul Cleland of Werksmans
For
the Commission:
Rethabile Ncheche and Themba Mahlangu
[1]
See Merger Record,
inter alia
page 28.
[2]
Transcript, pages 8 and 9.
[3]
Merger Record, pages 12, 89 and 90.