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Record:
| Header: |
Chlor-Alkali and Botswana Ash |
| Case No : |
34/LM/Apr09 |
| Parties: |
Chlor-Alkali Holdings (Pty) Ltd
AND
Botswana Ash (Pty) Ltd |
| Case Rating: |
3 |
| Date: |
14/5/2010 |
| Time: |
10:00:00 AM |
| Case summary: |
The Competition Tribunal, further to the recommendation of the Competition Commission, conditionally approved the merger transaction between Chlor Alkali Holdings (CAH) and Botswana Ash (Botash).
CAH, controlled by Investec, will acquire 50% shareholding in Botash from Anglo American, De Beers Botswana, AECI and FirstRand Bank, Nedbank, and Standard Bank. At the conclusion of the transaction, Botash will be jointly owned by the Government of Botswana and CAH.
The merger has been approved subject to the following conditions:
Chlor-Alkali Holdings ensures that, for as long as CAH exercises control over the salt operations of both Botswana Ash (¡§Botash¡¨) and the operations at Walvis Bay Salt Holdings (¡§WBSH¡¨), or for the life of the Botash mine (including any expansions to the existing mine), whichever is shorter:
a) Botash will supply any inland South African-based purchaser of un-bagged and railed chemical grade salt for use in South Africa, salt of the same or similar quality as set out in Annexure A to this condition, at the maximum prices set out in Annexure A1 (attached)
b) Botash¡¦s obligation to supply will be excused if any of the following circumstances are present or arise.
i) CAH nor Botash shall not be deemed to be in breach of the conditions by reason of any delay in performing, or failure to perform, any of its obligations under these conditions if the delay or failure was beyond Botash¡¦s reasonable control (including, without limitation, fire, flood, explosion, breakdown of equipment or machinery, epidemic, riot, civil commotion, any strike, lockout or other industrial action, act of God, war or warlike hostilities or threat of war, terrorist activities, accidental or malicious damage, or any prohibition by any governments or other legal authority which is not in force on the date of the drafting of these conditions); and
ii) ii) Botash¡¦s obligation to supply under the terms of these conditions will be subject to its existing supply commitments concluded in the ordinary course of business.
c) Botash shall be responsible for the transportation of each consignment of salt using the rail infrastructure and rail trucks from Sua Pan to Ramatlabama, subject to all rail service providers¡¦ performance and having the necessary rolling stock and equipment, and subject to the necessary agreements being concluded between the customer and such service providers. Delivery of each consignment of salt will be taken by the customer at Ramatlabama. Botash shall only be responsible for the rail logistics in Botswana and the customer shall manage the rail logistics in South Africa.
d) Botash will facilitate negotiations between new customers and Botswana Railways (¡§Botrail¡¨). To the extent that Botash receives any logistical advantage that it gives to Sasol or that Sasol would be entitled to claim with Botrail, Botash will pass on that advantage to any new customers.
e) WBSH will not discriminate in prices between its existing inland customers of chemical grade salt and any new inland South African-based purchaser of chemical grade salt.
f) Botash will provide the Commission annually, within one month of the anniversary of the Tribunal order, with an affidavit setting out the calculation of the increase in the gross price of chemical grade salt for each volume category (in accordance with conditions a(i) and (ii)) and provide for the previous year (i) a list of any requests for supply received from new inland South African-based purchasers of chemical grade salt; (ii) the actual volume of chemical grade salt supplied to each customer; and (iii) the actual price charged to each customer for chemical grade salt.
g) The Tribunal may, on good cause shown, and on notice given to the Commission and to the merged entities¡¦ existing customers of chemical grade salt, lift, revise or amend these conditions upon being approached by the merging parties.
Background
Initially, the Competition Commission recommended that the Tribunal prohibit this merger but then changed its recommendation to approval subject to certain conditions. The Commission said its conditions would remedy the competition concerns raised by the merger.
The Commission has concerns about the market for chemical grade salt, which is used in the manufacturing of chlor alkali products and derivatives targeted at the water treatment, industrial, paper and chemicals markets primarily in Southern Africa.
The competition concerns raised by the Commission include the following:
„X The merger results in the removal of the only competitor of CAH which supplies chemical grade salt. Currently CAH supplies chemical grade salt through its subsidiary, Walvis Bay Salt Holdings. The other alternative supplier of chemical grade salt is Botash which produces chemical grade salt as a by-product of ash.
„X Pre-merger Sasol was getting its chemical salt requirements from Botash, but also had the option of obtaining its requirements from Walvis Bay Salt Holdings.
„X The move from a duopoly to a monopoly may result in price increases;
„X CAH has the incentive and ability to foreclose downstream market players where its subsidiary, NCP Chlorchem (¡§NCP¡¨) is active. NCP manufactures and distributes chlor-alkali products and derivatives targeted at the water treatment, industrial, paper and chemicals markets primarily in Southern Africa.
„X Sasol is the only inland customer, which produces chlor alkali products. All other producers of chlor alkali products (Mondi, Sappi and Zetachem) are coastal. Transport costs will make it very difficult for Sasol to import chemical grade salt.
„X Sasol has recently concluded a long term supply agreement with the merging parties. The effects of that agreement on competition need to be considered.
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| Keywords: |
large merger, chemical, national, vertical integration, horizontal integration, monopoly, behavioural remedies, concentrated |
| Judgment source: |
Competition Tribunal |
| Documents: |
34LMApr09.pdf
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| Last update user: |
tebogo mputle |
| Last update date: |
18/5/2010 1:06:01 PM |
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