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JSE
GEN
GEN - General - Competition Commission recommends approval of BHP Billiton/Rio
Tinto merger with conditions
PRESS STATEMENT
23 October 2008
Competition Commission recommends approval of BHP Billiton/Rio Tinto merger with
conditions
The Competition Commission has recommended to the Competition Tribunal the
approval, subject to conditions, of the merger arising from the hostile takeover
bid in which BHP Billiton intends to acquire Rio Tinto.
Both BHP Billiton and Rio Tinto are major global mining houses whose activities
largely overlap in the supply and mining of gold, copper, aluminium, mineral
sands, uranium, thermal coal, metallurgical coal, diamonds, iron ore,
molybdenum, sulphuric acid, nickel, cobalt and silver.
The Commission conducted an extensive assessment of the markets where the
parties have significant presence or derive revenue in South Africa, including
mineral sands, thermal coal and aluminium. While the Commission found no major
competition concerns in other markets, it found that the merger would result in
the prevention of competition in the primary aluminium market in South Africa.
The Commission also found that the merger would have a negative impact on
downstream industries that beneficiate aluminium.
BHP Billiton is the only producer of primary aluminium in South Africa, through
its smelters in Richards Bay, while Rio Tinto is at an advanced stage in
constructing an aluminium smelter in the Coega Industrial Development Zone in
Port Elizabeth. Had it not been for the current electricity shortage in South
Africa, the construction of the smelter would have been underway. Nevertheless,
this delay will be short-lived as there are plans to address this problem in the
near future.
In its investigation, the Commission established that the Rio Tinto smelter
would have brought about competition to BHP Billiton in South Africa, which has
enjoyed a near-monopoly for many years. This would, in addition, enhance the
benefits to firms that use the metal in South Africa. BHP Billiton has adopted
a pricing regime that has reduced the benefits to these downstream firms. This
pricing regime has however been recently discarded, as a response to the
prospect of a new entry in Coega.
The Commission has recommended to the Competition Tribunal that the merger be
approved subject to BHP Billiton divesting of the entire interest to be acquired
by it from Rio Tinto relating to the Coega Aluminium Smelter Project within
twelve (12) months of the implementation of the proposed merger. This includes
agreements made between Rio Tinto and Eskom and the South African Government
relating to the supply of electricity and other elements necessary for the
development of the Coega Aluminium Smelter Project.
Tembinkosi Bonakele said "In this transaction we paid particular attention to
the effect of this merger on local customers who use aluminium as an input in
their business. These beneficiating industries are important for economic growth
and job creation in South Africa."
ENDS
Prepared by: FD Beachhead
Dani Cohen-021 487 9000 / 082 897 0443
Jennifer Cohen- 011 214 2401/ 082 468 6469
Senzi Dlamini - 011 214 2420 / 073 494 0030
On behalf of: The Competition Commission
Further info:
Tembinkosi Bonakele, Head of Mergers & Acquisitions
012 394 3294 / 079 872 3659 / tembinkosib@compcom.co.za
Date: 23/10/2008 15:34:15 Produced by the JSE SENS Department. |
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