Optimum, Tegeta deal to be scrutinised

Johannesburg – The Competition Tribunal will on Wednesday mull over Gupta family-owned Tegeta’s acquisition of Optimum Coal, following the Competition Commission’s conditional approval of the deal last week.

The R2.15 billion deal must still pass the tribunal hurdle, despite the commission giving it the go-ahead on condition that there will be no retrenchments as a result of the transaction.

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Tribunal spokeswoman Chantelle Benjamin said yesterday that the Tegeta transaction required the tribunal’s approval as it was considered a large merger.

“A large merger is when turnover or assets of the merging parties are more than R3.5bn and the turnover of the target firm exceeds R200 million,” Benjamin said.

She said the tribunal could approve the deal or send the matter back to the commission for further investigation.

In its recommendation for the approval of Tegeta’s acquisition of Optimum, the commission said the deal was unlikely to substantially prevent or lessen competition in the thermal coal market.

The commission said Tegeta and Optimum were smaller players in the thermal coal market and faced competition from larger rivals such as Anglo American, Exxaro Coal and South 32.

It said there were credible alternative suppliers of thermal coal that would continue to constrain the merging parties post-merger.

Tegeta, which was formed in 2006, holds two mining rights for coal in the Delmas area and prospecting rights in Mpumalanga, Free State, KwaZulu-Natal and Limpopo either directly or through associates.

It is owned by Oakbay Investment and Mabengela Investments, a company in which President Jacob Zuma’s son Duduzane has a stake.

As part of the transaction, Tegeta has also acquired six other companies: Optimum Coal Terminal, Koornfontein Mine, Optimum Nekel Mining and Exploration, Optimum Vlakfontein Mining and Exploration, Optimum Overvaal Mining and Exploration, and Optimum Mpefu Mining and Exploration.

Tegeta has a long-term contract to supply coal to state-owned power utility Eskom’s Hendrina power station in Mpumalanga.

Eskom spokesman Khulu Phasiwe said yesterday that other than holding the new owners to the existing conditions of the long-term coal contract, the power utility had “no issues” with the deal.

Phasiwe said the conditions included supplying coal to Eskom at R150 a ton until 2018.

“We have decided not to enter into a long-term contract with Koornfontein until the acquisition is completed. When the deal is through, we will seek a long-term contract.

“It is not a foregone conclusion that Koornfontein will supply Komati power station. There is going to be an open procurement process.”