The parties
The parties to the transaction are:
Sasol Mining, a wholly owned subsidiary of Sasol Limited. Sasol Limited does not have a single controlling shareholder.
Anglo Operations Limited, acting through its Anglo Coal Division. Anglo Operations Limited is a wholly owned subsidiary of Anglo American
Corporation of South Africa Limited, which in turn is controlled by Anglo American Holdings Limited, a company registered in the
United Kingdom. Anglo does not have a single controlling shareholder.
The rationale for the transaction
Sasol’s coal reserves at its Syferfontein Opencast Colliery will be exhausted in four years time. In order to secure the future
supply of thermal coal, Sasol Mining decided to source a portion of its thermal coal requirements from outside its own organisation.
Anglo owns undeveloped reserves adjacent to Sasol’s existing colliery. The Kriel South reserves lie in close proximity to Sasol’s
existing operations and the continuous nature of the coal seam means that the gasification characteristics of the coal are well known
to Sasol.
Furthermore, by selling its opencast mining equipment and infrastructure to Anglo Sasol will realize a return on its assets, which
otherwise would have become redundant in 2007. Anglo will use these assets to develop the new opencast mine.
Evaluating the merger
The relevant market
Sasol’s core-activities are the conversion of coal into synthetic fuels and chemicals as well as the refining of crude oil into
liquid fuels. These core activities are complemented by coal-mining operations and oil and gas exploration and production. Sasol
Mining produces thermal coal primarily for use within the Sasol Group.
Anglo Operations owns collieries that mainly supply thermal and metallurgical coal to Eskom, other domestic users and the export market.
The relevant market is therefore defined as the market for thermal coal sold in the South African market.
The market shares of the five largest producers of thermal coal, excluding Sasol, in South Africa are:
BHP Billiton
36.9%
Anglo Coal
26.3%
Eyesizwe
10.0%
Kumba
9.5%
Duiker
8.9%
Effect on competition
Although both parties are active in the mining of thermal coal within South Africa, Sasol Mining is not a competitor of Anglo Operations,
as it is not regarded as a participant in the market for the production and supply of thermal coal to domestic third parties. It
consumes its entire annual thermal coal production internally.
The coal supplied by Anglo Operations will replace Sasol’s supply from its Syferfontein colliery. As a result of the transaction
Anglo Operations will become the first outside coal supplier to gain access on a long-term contractual basis to Sasol’s previously
closed coal market.
Eskom and Sasol account for approximately 90% of thermal coal consumption in South Africa. The proposed merger will not have an impact
on the supply of coal to Eskom, as its supply is secured by long-term supply agreements. Furthermore, since there are a number of
coal suppliers with excess production the remaining smaller thermal coal consumers will not be negatively affected by the transaction.
We thus agree with the Commission that the transaction will not significantly prevent or lesson competition in the relevant market.
Public interest
The transaction does not raise any public interest concerns.
____________
12 August 2003
D Lewis
Date
Concurring: N Manoim, F Fourie
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