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CompComm blocks proposed Andalusite, Imerys deal

17th April 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – The Competition Commission (CompComm) has prohibited the proposed acquisition of andalusite miner Andalusite Resources by counterpart Imerys South Africa, outlining on Friday that the transaction would result in the removal of an effective competitor in the market for fine- and medium-grade andalusite.

The commission found that the merging parties were close competitors and said that no evidence was discovered during the investigation that the customers of the merging parties would benefit post-merger.

Further, the commission found that barriers to entry in the mining and supply of andalusite were relatively high, as the capital requirements and regulatory requirements were significant.

Calderys, the downstream arm of Imerys, was a major player in the supply of refractory products and the commission believed that the merged entity would have an incentive to engage in input foreclosure through Calderys to the detriment of competition downstream.

Andalusite formed part of the alumina-silicates group of compounds that possessed heat-resistant properties and were widely used in high-temperature industrial processes, such as in furnaces, kilns, crucibles and ladles, which required refractories for steel, cement, aluminium and glass applications.

With the exception of andalusite and chamotte, no other alumina-silicates were mined in South Africa. Such materials were imported from countries such as China, France, Brazil, the US, Russia, Australia and Germany.

“With regard to public interest considerations, the proposed transaction would have an impact on producers of refractories, [as] the iron and steel industries consume the vast majority of alumina-silicate-based refractories.

“Further, the merging parties anticipated that 3.6% of the employees are likely to be retrenched as a result of the proposed merger. The commission is of the view that the merging parties have failed to provide evidence on how the proposed transaction would enable them to become more competitive globally given that they are currently the main players in the global market for andalusite,” it stated.

The commission added that it had received concerns from both the producers of refractories and end-users that the proposed transaction removed competition, as there would be no alternative supplier of andalusite locally, post-merger.

In response to the concerns raised, the merging parties proposed a supply condition limited to two to three years for all grades of andalusite other than coarse grade.

However, customers’ general view was that the merger should not be allowed and that the proposed remedy would not address their concerns with the proposed transaction.

“The commission is also of the view that the structural changes in the market brought about by the proposed transaction are not addressed by the proposed remedy.The proposed transaction is likely to lead to a substantial prevention or lessening of competition in the market for the mining and supply of andalusite in South Africa and is, therefore, prohibited.

“There is no evidence of any pro-competitive or public interest benefits that may arise as a result of the proposed transaction that will outweigh the anticompetitive effects identified,” it concluded.

Edited by Creamer Media Reporter

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