Allowing a hostile takeover of mining company Gold Fields by rival Harmony is not in the public interest, the Competition Tribunal heard in Pretoria on Monday.
A merger could be to the detriment of the industry, to empowerment and to at least 1 500 Gold Fields employees who stand to lose their jobs, lawyers for the company contended in closing arguments.
”These are not golf-playing ornaments, they are people,” Jeremy Gauntlett, SC, argued for Gold Fields. The mining company is asking the tribunal not to allow the merger, or alternatively to impose strict conditions.
The fact that the 1 500 individuals facing retrenchment because of the merger are shift bosses or higher, and do not face imminent poverty, does not improve the picture, Gauntlett said.
”They are human beings. There is no justification for it. There is no rationale.”
Gold Fields contends there is no reason for the 1 500 — the figure at which Harmony has agreed to cap retrenchments — to lose their jobs. Gold Fields itself has no intention to lay off employees.
The company urged the tribunal to consider such public interest factors when deciding on Harmony’s hostile bid.
Alfred Cockrell, advocate for Gold Fields, said the tribunal’s main brief of considering whether the merger will substantially lessen or prevent competition in the industry is not the end of the matter.
”The public interest can sanitise a merger if uncompetitive,” he argued. ”Equally, the public interest can impugn a merger that is found not to be uncompetitive.”
The tribunal has to consider the effect of the proposed merger on the gold-mining sector and employment, Cockrell argued.
”This mandate cannot be avoided,” he said.
Matters such as the effect of a merger on Gold Fields’ black economic empowerment obligations also have to be considered.
If the tribunal finds the merger is justifiable because there is no negative impact on the public interest, it still has to consider whether the deal will be justified by virtue of a positive impact.
Harmony has not put forward any positive case in this regard, Cockrell argued.
”There has been no evidence that a merger is justified on public-interest grounds.”
He said Harmony will not be able to achieve the costs savings it intends, about R1-billion a year, by retrenching 1 500 people.
On Gold Fields’ calculations, retrenchments will have to exceed 7 000.
Mike van der Nest, also for Gold Fields, argued that the figure of 1 500 is not scientifically calculated.
But even if Harmony manages to keep its word, 1 500 retrenchments are still a significant number.
”What is the greater good of putting these 1 500 jobs at risk?” Van der Nest asked. ”Where is the gain?”
‘Financial distress’
He pointed the tribunal to the different financial fortunes of the two companies, and said that Harmony’s ”financial distress” will rub off on the new merged entity.
”There are various warning lights,” Van der Nest said.
Harmony has moved from a cash or cash-equivalent position of R2,37-billion at April last year to a negative figure of R233-million last month.
Evidence suggests seven quarters of losses, while Harmony’s net debt has risen from R2,565-billion in December last year to R3,177-billion at the end of the March quarter.
Cockrell asked the tribunal to consider the effect of the merger on the gold-mining sector — dominated by three companies, of which Gold Fields and Harmony are two.
Harmony’s questionable financial health could negatively affect the sector as a whole, he argued.
David Unterhalter, SC, for Harmony, said Gold Fields is asking the tribunal to exceed its mandate.
”They are saying you are a competition tribunal and a public-interest tribunal,” he argued.
He accused Gold Fields of seeking to downplay the competition aspect, saying it has produced no real evidence that a merger will substantially lessen or prevent competition.
”On any view, one can now say — having given Gold Fields every opportunity to advance a proper competition case — that there is no case.”
There is nothing in law allowing the tribunal, if it finds the deal to be pro-competitive or neutral, to prevent the merger based on it not having any attributes for the public interest.
”This is an unimaginable construction of what the law is intended to achieve.”
The merger, Unterhalter added, is ”in no way hostile to the public interest”.
The Competition Commission has proposed that the takeover be allowed to go ahead, provided that Harmony caps retrenchments at 1 500. — Sapa