Bloomberg News

South Africa Says Glencore-Xstrata Deal Won’t Raise Coal Prices

March 06, 2013

South Africa’s antitrust regulator, which in January approved Glencore International Plc (GLEN)’s $35 billion takeover of Xstrata Plc (XTA), said it granted clearance on the basis it believes the deal won’t increase coal prices.

“The Tribunal found that although the increasing prices of thermal coal supply to the domestic market was a very serious concern, given its effect on electricity prices, and indeed on the entire economy, the Glencore-Xstrata merger was unlikely to make the situation worse,” the Pretoria-based Competition Tribunal said in a ruling posted on its website.

Eskom Holdings SOC Ltd., South Africa’s state-run power utility, agreed Jan. 18 to withdraw its intervention in the transaction after reaching an accord with Glencore and Zug, Switzerland-based Xstrata over coal supplies. The terms the companies agreed to are confidential, a point criticized by competition regulator Deputy Commissioner Tembinkosi Bonakele at a hearing in January.

A month earlier, Eskom, which supplies about 95 percent of South Africa’s electricity, said it had concerns that the takeover would impair its ability to secure timely and competitively priced coal. The combined entity would account for about 15 percent of Eskom’s coal supplies, the utility said Dec. 7, adding that it wanted conditions imposed on the deal.

Glencore will resume talks in coming days with China’s competition regulator on the influence the group will have in the copper market as the Baar, Switzerland-based commodities trader pursues the final approval for the acquisition, Chief Executive Officer Ivan Glasenberg said yesterday.

Glasenberg is seeking to buy Xstrata to create the world’s fourth-largest mining company by adding coal, copper, nickel and zinc operations to its cotton-to-crude-oil trading empire. The biggest publicly traded commodities supplier yesterday extended to April 16 a deadline to complete the deal as it looks to clear the final hurdle for a takeover that after 13 months has won approval in Europe, Australia and South Africa.

To contact the reporter on this story: Jesse Riseborough in London at jriseborough@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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