South Africa backs Glencore-Xstrata deal
Johannesburg, 22 October (Argus) – South Africa's Competition Commission today said it backed trading firm Glencore's planned $33bn merger with Switzerland-based mining firm Xstrata. Both Glencore and Xstrata produce and trade coal in South Africa.
The commission investigated how coal was supplied to state-owned power firm Eskom and to export markets through the Richards Bay Coal Terminal and concluded that “the transaction is not likely to lead to a substantial prevention or lessening of competition”.
But the commission did say there were “public interest concerns” over the planned loss of 180 jobs in South Africa as a result of the proposed merger. It recommended that the job losses be restricted to 80.
The commission recommended that the country's higher Competition Tribunal formally approve the deal.
Glencore is active in anthracite and thermal coal mining in South Africa through its shareholdings in Xstrata and local mining firms Shanduka, Umcebo and Optimum.
Glencore has a 33.65pc stake in Xstrata and acts as a trader of Xstrata coal.
The potential merger with Xstrata would have a market value exceeding $90bn. The deal would reinforce Glencore's coal mining presence in South Africa and Colombia, while adding mines in Australia and Canada to its coal portfolio. Xstrata produced 85.3mn t of coal last year — its highest ever output — as its average sales price rose by over 30pc.
Glencore floated on the London and Hong Kong stock exchanges in May last year. It is the world's largest supplier of seaborne thermal coal — accounting for around 28pc of the 692mn t market in 2010 — and is one of the largest non-integrated physical suppliers of crude and oil products.
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