Imerys and Andalusite Resources both
operate mines in the Thabazimbi area of South Africa,
where the companies say they can achieve significant
cost synergies if they are allowed to merge.
(Source: Pascal Parent)
The South African Competition Tribunal’s
hearing of Imerys SA’s appeal against a blocked
merger with Andalusite Resources Pty Ltd has been suspended
until February 2016, after both companies delayed the
submission of their supporting information.
The hearing began on 5 October and was intended to establish
whether a merger would be anti-competitive, as alleged by the
South African Competition Commission (CompComm). According to
CompComm’s assessment of the deal, which would see
France-based Imerys take control of South African-operating
Andalusite Resources, andalusite would become more expensive to
buyers and create difficulties for refractory producers and
other end users.
The case was originally scheduled to last three weeks and
end on 23 October. Proceedings were postponed on 15 October, to
resume on 26 October when the parties, which both support the
merger, would introduce new evidence to CompComm. However, the
postponement has now been extended to February 2016, after it
appeared that the companies would not have their revised
submissions ready in time.
In its report published in April, CompComm found that Imerys
and Andalusite Resources were the only miners and suppliers of
andalusite in South Africa and that a tie-up between these
companies would have the effect of "significantly preventing
competition" in the fine and medium grade andalusite
In response to the concerns raised by CompComm, Imerys and
Andalusite Resources said the businesses had jointly proposed a
supply condition limited to two-to-three years for all grades
of andalusite other than coarse grade, in order to give local
downstream operators time to adapt to changes in the sector
brought on by a merger.
According to court transcripts seen by IM,
on the second day of the hearing, counsel for CompComm, Jerome
Wilson, said: "This transaction is largely about an attempt by
a dominant andalusite miner, both globally and in South Africa,
to buy the thorn in its side which has grown."
He also referenced a document entitled "Andalusite South
Africa Business Review", produced by Imerys in 2013, which
stated that Imerys’ aim was to "obtain [a joint
venture with] or buy ARM [Andalusite Resources] to increase our
leverage in the markets."
"It does seem like a remarkable coincidence,
doesn’t it, that at exactly the time that you are
engaging for purposes of a potential acquisition with
Andalusite Resources, you have a document from the general
manager of your South African business, which indicates quite
clearly a motivation behind a transaction as to increase our
leverage on the markets and you take the position
opportunistically here that that had nothing to do with the
decision making within your organisation?", Wilson said.
Imerys’ strategy and business development
manager in high resistance minerals, Alan Parte, responded by
saying that the company had been looking at several targets at
the time the document referred to was published, not all of
which had been competitors to Imerys. "We even visited
Andalucita in Peru in the same period," he said.
Parte argued that significant expansion by international
rivals and enhanced competition in export markets was creating
a very competitive environment and that the merged entity "will
be able to compete more effectively than the parties
individually in these markets".
Both Andalusite Resources and Imerys operate andalusite
mines in the Thabazimbi area of South Africa, which is around
220km northwest of Johannesburg.
"The rationale is, basically, we have two sites that are
next to each other, we can become much stronger. Our focus is
in the export markets, so we do export actually 85% of our
volumes, that’s not too confidential," Parte
Andalusite forms part of the alumina-silicates group of
compounds that possess heat-resistant properties, making them
suitable for use in high temperature industrial processes.
South Africa possesses by far the largest portion of the
world’s known andalusite deposits, accounting for
around 64% of global supply.
Through its various subsidiaries and mining operations in
South Africa, France and China, Imerys controls around 67% of
the world andalusite market. A merger with Andalusite
Resources, which controls another 15%, would leave only 18% of
the market in the hands of other suppliers.