The Competition Tribunal has unconditionally approved the merger of LNM Holdings NV and Iscor Limited, the regulator said in a statement on Tuesday.
”Reasons for the decision will be released in due course,” the tribunal said.
LNM Holdings, the world’s second largest steelmaker, intends to increase its shareholding in Iscor to more than 50%, which will give it a controlling interest.
Several trade unions and the Ministry of Trade and Industry participated in the merger proceedings, the tribunal said.
Concerns were expressed regarding the effect of the merger on domestic steel prices as well as employment. Subsequent to the ministry’s notice of intention to participate, the department of trade and industry reached an agreement with LNM
and decided to support the merger.
The tribunal’s ruling follows the competition commission’s recommendation on May 13 that LNM should be permitted to take majority control of Iscor, the company said in a statement.
”LNM currently holds 49,9% of Iscor shares through LNM Holdings NV, with the balance of the shares being listed on the Johannesburg Securities Exchange (JSE),” the company said.
”LNM Holdings has been a long-term investor in Iscor, purchasing its first stake in the company in 2001, when it was undergoing a major corporate restructuring process.”
LNM chairperson Lakshmi Mittal said he was very pleased with the findings of the Tribunal that the proposed merger would not result in any structural change affecting the competitive landscape in South Africa and, therefore, would not raise any competition concerns.
”The approval will enable Iscor to receive our proprietary technology as well as access our proprietary marketing and procurement processes. It will also enable Iscor to ask for continuing business assistance from LNM to further improve
efficiencies and achieve cost savings,” Mittal said.
Iscor spokesperson Phaldie Kalam called the decision ”one that was made in the interest of the country and which will benefit both companies going forward.
”What this shows, is that during a legal process, the true facts will always prevail and that constant repetition of wrongful information, doesn’t necessarily make it right.”
Kalam said the approval created a new transnational steel producer in South Africa. He added that the South African steel market remained competitive notwithstanding the presence of a dominant player.
”Steel therefore transacts in a generally free market in this country and has minimal barriers to entry, other than a small import tariff, which is among the lowest in the world. Secondary steel manufacturers can therefore freely source steel from anywhere in the world if they can find it cheaper,” said Kalam.
”It is our endeavour going forward, that we will ensure the continued application of free market principles — as has been the case in the past – in all our business dealings with the market,” he said.
But Dirk Hermann of the Solidarity trade union disagreed, saying that while it was a victory for Mittal, it was a loss for the country.
”The decision is good for shareholders but bad for stakeholders,” he said.
”What we mean is the workers, the community and the environment. The reason we say so is because of Mittal’s poor environmental record in places such as Ireland and his contempt for workers’ rights. All of this will put additional pressure on communities already suffering from unemployment and land degradation.
”The decision of the Tribunal was technically correct as they had to look at Competition but the Act also requires them to consider the public interest. This decision is not in the public interest,” Hermann said.
Iscor employs 12 257 staff. It caused a stir in April by announcing it planned to retrench more than 1 300 workers this year to cut costs and remain internationally competitive. The company has recently also come under fire for its steel pricing structure.
Gold miners Harmony and Durban Roodepoort Deep last month effectively accused Iscor of being a malevolent monopoly and gas cylinder manufacturer Cadac on Monday told the Tribunal that the steel maker was colluding with local steel merchants MacSteel and Anglovaal to keep steel prices high to the detriment of the downstream sector.
Cadac chief executive Simon Nash said the collusion had resulted in his company closing one of its factories.
It is expected that LNM will now increase its share in Iscor to 60 percent. Media reports have also speculated that LMN would eventually delist its soon-to-be-subsidiary from the JSE. – Sapa