The Merger Transaction
Highveld Steel & Vanadium Corporation Ltd (“Highveld”), Samancor Ltd and the Industrial Development Corporation of
South Africa (IDC) are equal partners in Columbus Joint Venture, an unincorporated partnership trading as Columbus Stainless. The
partners will transfer the business of Columbus Stainless into Newco, a shelf company, pursuant to which Acinerox will acquire a
major share in Newco.
Upon implementation of the transfer of the business to Newco, Acerinox shall acquire 64% of the issued share capital of Newco in equal
shares from each of the three partners. Highveld, Samancor and the IDC will each hold 12% of the issued share capital.
The merging parties submit that the transaction will improve the company’s competitiveness in respect of international markets
because Columbus will gain technological advantages. The acquisition will also ensure direct foreign investment in Columbus bringing
about further capital expansion, technical assistance in the manufacturing processes, access to Acerinox’s distribution network,
market information and intelligence and access to technology and skills.
Evaluating the Merger
The relevant market
Acerinox is a Spanish stainless steel producer and Columbus is the sole producer in the South African domestic market. Both parties
sell their products globally as well as in South Africa, where Columbus sells 25% of its production and Acerinox less than 1% of
its production.
Both merging parties manufacture stainless steel. The product market can be divided into four narrow markets, i.e. cold rolled or
hot rolled Austentic stainless steel and cold rolled or hot rolled Ferritic steel
The market shares of the merging parties in South Africa are as follows:
| PRODUCT |
COLUMBUS |
ACERINOX |
| Austentic: |
|
|
| Cold rolled |
90% |
Less than 2% |
| Hot rolled |
90% |
Less than 2% |
| Ferritic |
|
|
| Cold rolled |
90% |
Less than 2% |
Columbus provides 90% of the stainless steel market in South Africa the remaining 10% is imported. We are not certain if the market
is an international or national market with import competition. The parties themselves did not satisfactorily answer this question
at the hearing.However, we do not have to decide this, as nothing turns on the precise definition of the geographic market.
Even if we regard the market as a national one, the effect of the transaction on the national market is minimal given Acerinox’s
insignificant South African market share. The effect in the global market for stainless steel where the combined market share post
merger would be 7.9% is also and does not raise competition concerns given the fact that there are eight other international competitors.
Public Interest
The merger does not raise any of the public interest concerns enumerated in section 26(3).
_____________
16 January 2002
N.M Manoim
Date
Concurring: C. Qunta and P.E Maponya
.RTF of original document