Seriti / South32 coal merger – approved subject to conditions

On 23 December 2020, the South African Competition Tribunal approved the proposed acquisition of South32’s South African coal operations by a subsidiary of Seriti Resources, subject to conditions.The merger creates the largest single supplier of coal to Eskom.  Following its investigation, the Competition Commission recommended the conditional approval of the merger on the basis that, despite the structural change brought about by the merger, the merger was unlikely to materially impact on bargaining dynamics between Seriti and Eskom.  This was because of the individualised nature of negotiations around long-term coal supply contracts and the limited (and unchanged) outside options that would be available to each party in those negotiations post-transaction. During the hearing of the matter before the Competition Tribunal, the Tribunal raised concerns regarding the increased coal prices paid by Eskom over the past several years, as well as concerns regarding the security of supply of coal to Eskom and the potential for the exclusion of junior miners, in particular from export coal markets.  The Tribunal utilised its inquisitorial powers to summons Eskom representatives to give evidence on these matters, and also engaged extensively during the oral evidence presented by the Competition Commission, and the merging parties, among others. Working alongside Nortons Inc and ENSafrica, RBB assisted the merging parties in making submissions during the Commission’s investigation of the merger.  During the hearing before the Tribunal, RBB economists Jacob MullerJacob MullerPrincipaland Patrick SmithPatrick SmithPartner each provided oral evidence on the nature of competition, the likely competitive effects of the merger and the assessment of the proposed conditions.