Conditional approval for Harmony-Gold Fields merge
Conditional approval for Harmony-Gold Fields merger
February 11, 2005
Johannesburg - The Competition Commission recommended conditional approval on Friday of the merger between mining groups Harmony and Gold Fields.
`The Competition Commission has made a recommendation to the Competition Tribunal to approve the proposed merger between Harmony Gold Mining Company Ltd and Gold Fields Ltd, subject to certain conditions aimed at addressing the employment concerns that arise,` a statement from the commission read.
Due to the hostile nature of the proposed takeover the commission found it difficult to assess the effect of a merger on jobs.
`Harmony anticipates that about 1 500 employees will be retrenched while interested parties, including trade unions, estimate between 1 000 and 14 000 job losses,` the commission said.
The commission therefore attached the retrenchment conditions and recommended measures to ensure that these conditions were adhered to.
Under the recommendations, no retrenchments below the level of corporate, management and supervisory positions as a result of the merger may take place for two years.
The merged company may retrench no more than 1500 employees in corporate, management and supervisory positions - positions from shift-boss level to the chief executive.
Commissioner Menzi Simelane said although this merger did not raise competition concerns, it was the duty of the commission to ensure that public interests such as employment were not adversely affected by it.
`Where such adverse effects are likely to occur, one has to find a balance, because public interests are equally important in our analysis. In this case, it is our view that the conditions recommended herein will address the concerns without hampering the ordinary running of the merged entity`s business.`
The proposed merger follows a process begun in October 2004, in which Harmony intends to acquire 100 percent of the issued share capital in Gold Fields - a move which Gold Field objected to.
The commission found that both companies were involved in the production and supply of gold in the global market, with Harmony and Gold Fields accounting for 5.2 percent and 4.3 percent respectively of South Africa`s 14 percent contribution to global production.
Given the low market shares of the two firms combined, the proposed merger was unlikely to raise concerns about competition.
`This is more so because a change in the production of gold does not necessarily affect its world price, as this is determined at the daily gold fix. It appears therefore that no gold mine can influence the price of gold.`
Gold Fields had said the proposed merger could negatively affect some of its suppliers. The commission decided that it would not be in Harmony`s interest to exclude certain suppliers after the merger, as they currently supplied Harmony too.
Harmony`s contracts were awarded by tender, and there was no indication that other suppliers would be excluded from tendering or competing for the business.
These include submitting quarterly reports which must include current levels of employment per job category at the merged entity, the number of actual retrenchments per job category in the quarter reported on, and the status of further retrenchments. - Sapa
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