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[2019] ZACT 60
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OCI Fertilizers Exports Holdings Limited v OCI Mena & Ruwais Fertilizer Industries Limited (LM074Jul19) [2019] ZACT 60 (20 September 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM074Ju119
In the
matter between:
OCI
FERTILIZERS EXPORTS HOLDINGS LIMITED
Primary Acquiring Firm
and
OCI
MENA & RUWAIS FERTILIZER INDUSTRIES
Primary Target Firms
LIMITED
Panel
: Yasmin
Carrim (Presiding Member)
:
Enver Daniels (Tribunal Member)
:
Andreas Wessels {Tribunal Member)
Heard
on
: 11
September 2019
Order
issued on
:
11
September 2019
Reasons
issued on
: 20
September 2019
REASONS
FOR DECISION
Approval
[1]
On 11 September 2019, the Tribunal unconditionally approved a
transaction in terms of which OCI Fertilizers Exports Holdings
Limited
("OCI") acquired sole control of OCI MENA &
Ruwais Fertilizer Industries Limited.
[2]
The reasons for the approval follow.
Parties to the transaction and their activities
Primary
acquiring firm
[3]
OCI
is a newly established company incorporated in accordance with the
company laws of the United Arab Emirates. OCI is a special
purpose
vehicle jointly controlled by OCI N.V. (58%) and Abu Dhabi National
Oil Company ("ADNOC") (42%). OCI N.V. is
a holding company
and is not controlled by any firm or shareholder. ADNOC is ultimately
owned by the Emirate of Abu Dhabi. OCI
N.V. and ADNOC directly or
indirectly control several firms.
[1]
OCI N.V. and ADNOC, as well as all the firms directly or indirectly
controlled by them, are hereafter collectively referred to
as the
Acquiring Group.
[4]
The
Acquiring Group is active in:
4.1.
The production and distribution of fertilizer products
(including natural gas- based fertilizers, ammonia, urea and diesel
exhaust
fluid);
4.2.
The exploration, production and refining of oil and natural
gas;
4.3.
The marketing and distribution of natural gas; and
4.4.
The production of petrochemicals.
[5]
OCI
N.V.'s activities in South Africa are limited to the sale of
melamine, calcium ammonium nitrate and ammonium sulphate used in
the
production of fertilizer. ADNOC's activities in South Africa are
limited to the sale of crude oil, sulphur, polyethylene, urea
and
polypropylene.
Primary target firm
[6]
The
primary target firms consist of OCI N.V.'s nitrogen fertilizer
business in the Middle East and North Africa ("OCI MENA")
and the entire nitrogen fertilizer business of ADNOC trading as
Ruwais Fertilizer Industries Limited ("Fertil").
[7]
OCI
MENA is a company incorporated in accordance with the laws of the
Netherlands; whereas Fertil is incorporated in accordance
with the
laws of the United Arab Emirates. OCI MENA is ultimately controlled
by OCI N.V. whilst Fertil is ultimately controlled
by ADNOC.
[8]
OCI
MENA controls a number of firms however Fertil does not control any
firms.
[2]
Both firms are involved in the production and distribution of
fertilizer products. Fertil and OCI MENA as well as all the firms
directly or indirectly controlled by them, are hereafter collectively
referred to as the Target Group.
Proposed
transaction and rationale
[9]
In terms of the proposed transaction, OCI N.V. and ADNOC will
be combining their nitrogen-based fertilizer businesses under OCI.
Subsequent to the implementation of the proposed transaction, OCI
will acquire sole control over the Target Group.
[10] Regarding rationale, the parties
submitted a joint rationale stating that the transaction will result
in
greater geographic diversity to the production platform, an
improved distribution and logistics network, as well as leveraging
maintenance capabilities across their plants. Furthermore, it was
submitted that OCI will also benefit from enhanced operational
and
financial scale.
Relevant market and impact on competition
[11]
The Commission does not conclude on a relevant market but
analysed the effect of the transaction on the market for
nitrogen-based
fertilizers. The Commission found that there is no
horizontal overlap between the activities of the merging parties in
South Africa.
The different inputs supplied by the merging parties
are blended together in the manufacture of fertilizer and are not
substitutable.
[12]
The Commission did, however, identify a horizontal overlap in
relation to the supply of ammonia and urea globally and considered
whether this gave rise to any competition concerns in South Africa as
an export destination.
[13]
The Commission found the merged entity's combined global
production of urea constitutes less than 2% of the value of urea
imported
into South Africa for the year ended 2018. In addition, the
merged entity's combined global production of ammonia constitutes
less
than 2% of the value of ammonia imported into South Africa for
the year ended 2018.
[14]
Moreover, the Commission noted that there are several
alternative suppliers of urea and ammonia both globally and in South
Africa.
[3]
[15]
In view of the foregoing, the Commission concluded that the
merged entity will face significant constraint should it decide to
export
urea or ammonia into South Africa.
Public interest
[16]
The merging parties do not have any operations in South Africa
and accordingly do not have any employees located in South Africa.
The merging parties nevertheless provided an undertaking that the
proposed transaction will not result in any job losses or
retrenchments
in South Africa.
Conclusion
[17]
In light of the above, we concluded that the transaction is
unlikely to substantially prevent or lessen competition in any
relevant
market. In addition, no adverse public interest issues arise
from the transaction. Accordingly, we unconditionally approved the
transaction.
Ms Yasmin Carrim
Mr Enver
Daniels and Mr Andreas Wessels concurring.
20 Se
p
tember 2019
Date
Tribunal
case manager
:
Andiswa
Nyathi.
For the merging parties
:
Richardt van Rensburg of ENS Africa.
For the Commission
: Wiri
Gumbie and Zukile Sokapase.
[1]
These include OCI Personnel B.V. (Netherlands); Notore Chemical
Industries Ltd (Mauritius); OCI Nitrogen B.V. (Netherlands);
OCI
Fertilizer International B.V. (Netherlands); and Middle East
Petrochemical Corporation Ltd (Cayman); ADNOC Infrastructure
LLC;
ADNOC Distribution Assets LLC; ADNOC Reinsurance Ltd; ADNOC
Marketing International (Korea) Limited and Tanker Marine Chartering
Company Limited.
[2]
OCI MENA controls Orascom Construction Industries S.A.E. (Egypt);
Sorfert Algeria SPA (Algeria); Orascom Fertilizer Plant Maintenance
S.A.E. (Egypt).
[3]
These include Omnia, Greenfields, Westfert Fertilizer, Profert/ETG,
Sasol, Foskor, Yara, CF Industries, Qatar Fertilizer Company,
Saudi
Arabian Fertilizer Company, Eurochem Group, SABIC, Koch Fertilizer
and Algeria Oman Fertilizer, amongst others.