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[2018] ZACT 48
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Barrick Gold Corporation v Randgold Resources Ltd (LM1930ct18) [2018] ZACT 48 (16 November 2018)
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case
No: LM1930ct18
In
the matter between
Barrick
Gold
Corporation
Primary
Acquiring Firm
And
Randgold
Resources Ltd
Primary Target
Firm
Panel
: Enver Daniels (Presiding Member)
:
lmraan Valodia (Tribunal Member)
Heard
on
: 31 October 2018
Order
Issued on : 31 October 2018
Reasons
Issued on : 16 November 2018
REASONS
FOR DECISION
Approval
[1]
On
31 October 2018, the Tribunal unconditionally approved the large
merger transaction between Barrick Gold Corporation (Barrick
Gold)
and Randgold Resources Ltd (Randgold Resources), hereinafter
collectively referred to as the 'merging parties'.
[2]
Prior
to the commencement of the hearing, Ms Andiswa Ndoni (Ms Ndoni), the
third Tribunal Member who was supposed to sit on the
panel was
advised that a family member had passed away and thus was not in a
position to participate in the hearing. In terms of
section 31(3)(a)
of the Competition Act 89 of 1998 (“the Act”) I, Enver
Daniels as the Deputy Chairperson of this Tribunal,
in the absence of
the Chairperson as he was traveling abroad, assumed the position of
Chairperson and excused Ms Ndoni. I decided
to proceed with the
hearing with only two Tribunal Members sitting on the panel. No
objections were raised by the Commission or
the merging parties.
[3]
Our
reasons for unconditional approval follow.
Parties
to the transaction
Primary
Acquiring Firm
[4]
Barrick
Gold is a gold and copper mining company with gold mining operations
worldwide and also produces silver as a by-product.
[5]
Barrack
Gold is listed on the New York and Toronto stock exchange.
[6]
Barrick
Gold is not controlled by a single shareholder but controls a number
affirms worldwide. In Africa it controls Acacia Mining
Pie (Acacia)
which in turn controls two subsidiaries in South Africa: Acacia
Mining SA (Acacia SA) and Barrick Africa (Pty) Ltd
(Barrick Africa).
[7]
Barrick
Gold does not have any mining activities in South Africa.
[8]
Acacia
SA and Barrick Africa provide various internal administrative
services such as payroll, contract administration and financial
consolidation only to Acacia.
Primary
Target Firm
[9]
Randgold
has gold mines and various exploration programmes in Central and West
Africa where it mainly produces gold. Randgold also
produces silver
as a by product.
[10]
Randgold is listed in on the London Stock Exchange and its American
Depositary Receipts trade on NASDAQ.
[11] In
SA, Rand Refinery controls Seven Bridges - a firm that provides
various internal administrative
services such as payroll, contract
administration and financial consolidation only to Randgold.
[12] All
the gold produced by Randgold is transported and sold on its behalf
by Rand Refinery (Pty) Ltd
which is based in Germiston. Rand Refinery
then sells the gold to the international market.
[13] The
merging parties submit that post-merger this relationship shall
continue as is.
Proposed
transaction and rationale
[14]
Barrick Gold intends to acquire the entre share capital of Randgold.
Upon implementation, Barrick Gold
shareholders will own approx. 66.6%
of Barrick Gold shares and the remainder will be held by Randgold on
a diluted basis.
[15] Even
though the merging parties do not have any mining activities in South
Africa, the Act's merger
notification is triggered only because of
Randgold's use of Rand Refinery as its agent for the sale of gold.
[16] The
merging parties submitted that the merger will create an industry
leading gold company that holds
a diversified asset portfolio for
growth in many of the world's most prolific gold districts. Further,
the merger will generate
and deliver sector leading returns for
shareholders.
Relevant
market and impact on competition
[17] The
Commission considered the activities of the merging parties and found
a horizontal overlap in the
production and supply of gold and silver.
The Commission's investigation was confined to two markets: the
international market
for the production and supply of gold and the
international market for the production and supply of silver.
[18] In
the international market for the production and supply of gold, the
Commission found that the merging
parties will have an estimated
combined post-merger market share of less than 8%.
[19] In
the international market for the production and supply of silver, the
Commission found that the
merging parties will have an estimated
combined post-merger market share of less than 3%.
[20]
In
light of the low post-merger market share figures, the Commission
concluded that the proposed transaction is unlikely to result
in any
substantial lessening or prevention of competition as the merging
parties will continue to face competition from their mining
counterparts such as Glencore, AngloGold Ashanti, Navoi MMC and
others.
Public
interest
[21]
The
merging parties submitted that the proposed transaction will not have
any adverse effects on employment as no retrenchments
are anticipated
at Randgold either on the operational level or the management level.
The employee representatives of Acacia and
Seven Bridges confirmed to
have received notice of the merger. At first, the employees of Acacia
raised questions about the implication
of the merger on Acacia. It
was confirmed by the merging parties that Acacia will continue to
operate as is post-merger. No concerns
were raised by Seven Bridges'
employees.
[22]
From
the above, the Commission was satisfied that the proposed transaction
is unlikely to result in any negative effects on employment
and no
other public interest issues were seen to raise a cause for concern.
Conclusion
[23]
In light of the above, we concluded that
the proposed transaction is unlikely to result in a substantial
lessening or prevention
of competition in any market. In addition, no
other public interest issues arise from the proposed transaction.
Accordingly, we
approved the proposed transaction unconditionally.
Mr
Enver Daniels
Prof.
lmraan Valodia concurring.
16 November 2018
Date
Tribunal
Case Manager
: Ndumiso
Ndlovu
For
Barrick Gold Corporation : R Legh
of Bowmans
For
Randgold Resources Ltd
: M Griffiths of Norton Rose Fulbright
For
the Commission
: B Mabatamela and T Mahlangu