Barrick Gold Corporation v Randgold Resources Ltd (LM1930ct18) [2018] ZACT 48 (16 November 2018)
- Citation
- [2018] ZACT 48
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Enver Daniels, lmraan Valodia
- Case number
- LM1930ct18
More details
- Court
- Competition Tribunal
- Panel
- Enver Daniels, lmraan Valodia
- Case number
- LM1930ct18
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger between Barrick Gold Corporation and Randgold Resources Ltd would not result in a substantial lessening or prevention of competition in any market, given the low combined post-merger market shares in the international gold and silver markets. The merging parties would continue to face competition from other major mining companies. Furthermore, the Tribunal was satisfied that the transaction would not have any adverse effects on employment, as no retrenchments were anticipated and employee concerns were adequately addressed. No other public interest issues were identified. Accordingly, the Tribunal approved the merger unconditionally.
Court disposition
The large merger between Barrick Gold Corporation and Randgold Resources Ltd was unconditionally approved.
Orders
- The proposed transaction is approved unconditionally.
02
Material facts
Parties
Barrick Gold Corporation
Applicant Counsel: R Legh of BowmansRandgold Resources Ltd
Respondent Counsel: M Griffiths of Norton Rose FulbrightAmounts and remedies
- Estimated Post Merger Market Share in International Gold Market: 8
- Estimated Post Merger Market Share in International Silver Market: 3
03
Procedural history
Posture
Large Merger Application / Approval Hearing
04
Questions and positions
Legal issues
- 01
Whether the proposed merger between Barrick Gold Corporation and Randgold Resources Ltd is likely to substantially lessen or prevent competition in any market.
- 02
Whether the proposed transaction raises any public interest concerns, including adverse effects on employment.
Party arguments
- Applicant
- The merging parties argued that the merger would create an industry-leading gold company with a diversified asset portfolio, enabling growth in major gold districts globally. They asserted that the transaction would deliver sector-leading returns for shareholders and would not result in any adverse effects on employment, as no retrenchments were anticipated. Employee representatives of Acacia and Seven Bridges were notified, and concerns raised by Acacia employees were addressed by confirming continued operations post-merger.
- Respondent
- The Commission contended that the merger notification was triggered solely due to Randgold's use of Rand Refinery as its agent for gold sales in South Africa. The Commission investigated the international markets for gold and silver, finding low combined post-merger market shares (less than 8% for gold and less than 3% for silver). It concluded that the transaction was unlikely to result in a substantial lessening or prevention of competition and that no negative public interest effects, including on employment, were anticipated.
05
Court’s reasoning
Legal principles
- 01
Competition Act 89 of 1998, section 12A
A merger may only be prohibited if it is likely to substantially lessen or prevent competition in any market.
- 02
Competition Act 89 of 1998, section 12A(3)
Public interest considerations, including employment effects, must be assessed in merger proceedings.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between Barrick Gold Corporation and Randgold Resources Ltd would not result in a substantial lessening or prevention of competition in any market, given the low combined post-merger market shares in the international gold and silver markets. The merging parties would continue to face competition from other major mining companies. Furthermore, the Tribunal was satisfied that the transaction would not have any adverse effects on employment, as no retrenchments were anticipated and employee concerns were adequately addressed. No other public interest issues were identified. Accordingly, the Tribunal approved the merger unconditionally.
Obiter and limits
- The Tribunal noted that the merger notification was triggered solely due to Randgold's use of Rand Refinery as its agent for gold sales in South Africa, despite the merging parties having no mining activities in the country.
- The Tribunal proceeded with only two members on the panel due to unforeseen circumstances, and no objections were raised by the parties or the Commission.
Court disposition
The large merger between Barrick Gold Corporation and Randgold Resources Ltd was unconditionally approved.
- The proposed transaction is approved unconditionally.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION TRIBUNAL OF SOUTH
AFRICA
Case No: LM1930ct18
In the matter between
Barrick Gold Corporation
Primary Acquiring Firm
And
Randgold Resources Ltd
Primary Target Firm
Panel
: Enver Daniels (Presiding Member)
: lmraan Valodia (Tribunal Member)
Heard on : 31 October 2018
Order Issued on : 31 October 2018
Reasons Issued on : 16 November 2018
REASONS
FOR DECISION
Approval
[1] On 31 October 2018, the Tribunal unconditionally approved the large merger transaction between Barrick Gold Corporation (Barrick Gold) and Randgold Resources Ltd (Randgold Resources), hereinafter collectively referred to as the 'merging parties'.
[2] Prior to the commencement of the hearing, Ms Andiswa Ndoni (Ms Ndoni), the third Tribunal Member who was supposed to sit on the panel was advised that a family member had passed away and thus was not in a position to participate in the hearing. In terms of section 31(3)(a) of the Competition Act 89 of 1998 (“the Act”) I, Enver Daniels as the Deputy Chairperson of this Tribunal, in the absence of the Chairperson as he was traveling abroad, assumed the position of Chairperson and excused Ms Ndoni. I decided to proceed with the hearing with only two Tribunal Members sitting on the panel. No objections were raised by the Commission or the merging parties.
[3] Our reasons for unconditional approval follow.
Parties to the transaction
Primary Acquiring Firm
[4] Barrick Gold is a gold and copper mining company with gold mining operations worldwide and also produces silver as a by-product.
[5] Barrack Gold is listed on the New York and Toronto stock exchange.
[6] Barrick Gold is not controlled by a single shareholder but controls a number affirms worldwide. In Africa it controls Acacia Mining Pie (Acacia) which in turn controls two subsidiaries in South Africa: Acacia Mining SA (Acacia SA) and Barrick Africa (Pty) Ltd (Barrick Africa).
[7] Barrick Gold does not have any mining activities in South Africa.
[8] Acacia SA and Barrick Africa provide various internal administrative services such as payroll, contract administration and financial
consolidation only to Acacia.
Primary Target Firm
[9] Randgold has gold mines and various exploration programmes in Central and West Africa where it mainly produces gold. Randgold also produces silver as a by product.
[10] Randgold is listed in on the London Stock Exchange and its American Depositary Receipts trade on NASDAQ.
[11] In SA, Rand Refinery controls Seven Bridges - a firm that provides various internal administrative services such as payroll, contract administration and financial consolidation only to Randgold.
[12] All the gold produced by Randgold is transported and sold on its behalf by Rand Refinery (Pty) Ltd which is based in Germiston. Rand Refinery then sells the gold to the international market.
[13] The merging parties submit that post-merger this relationship shall continue as is.
Proposed transaction and rationale
[14] Barrick Gold intends to acquire the entre share capital of Randgold. Upon implementation, Barrick Gold shareholders will own approx. 66.6% of Barrick Gold shares and the remainder will be held by Randgold on a diluted basis.
[15] Even though the merging parties do not have any mining activities in South Africa, the Act's merger notification is triggered only because of Randgold's use of Rand Refinery as its agent for the sale of gold.
[16] The merging parties submitted that the merger will create an industry leading gold company that holds a diversified asset portfolio for growth in many of the world's most prolific gold districts. Further, the merger will generate and deliver sector leading returns for shareholders.
Relevant market and impact on competition
[17] The Commission considered the activities of the merging parties and found a horizontal overlap in the production and supply of gold and silver. The Commission's investigation was confined to two markets: the international market for the production and supply of gold and the international market for the production and supply of silver.
[18] In the international market for the production and supply of gold, the Commission found that the merging parties will have an estimated combined post-merger market share of less than 8%.
[19] In the international market for the production and supply of silver, the Commission found that the merging parties will have an estimated combined post-merger market share of less than 3%.
[20] In light of the low post-merger market share figures, the Commission concluded that the proposed transaction is unlikely to result in any substantial lessening or prevention of competition as the merging parties will continue to face competition from their mining
counterparts such as Glencore, AngloGold Ashanti, Navoi MMC and others.
Public interest
[21] The merging parties submitted that the proposed transaction will not have any adverse effects on employment as no retrenchments are anticipated at Randgold either on the operational level or the management level. The employee representatives of Acacia and Seven Bridges confirmed to have received notice of the merger. At first, the employees of Acacia raised questions about the implication of the merger on Acacia. It was confirmed by the merging parties that Acacia will continue to operate as is post-merger. No concerns were raised by Seven Bridges' employees.
[22] From the above, the Commission was satisfied that the proposed transaction is unlikely to result in any negative effects on employment and no other public interest issues were seen to raise a cause for concern.
Conclusion
[23] In light of the above, we concluded that the proposed transaction is unlikely to result in a substantial lessening or prevention of competition in any market. In addition, no other public interest issues arise from the proposed transaction. Accordingly, we approved the proposed transaction unconditionally.
Mr Enver Daniels
Prof. lmraan Valodia concurring.
16 November 2018
Date
Tribunal Case Manager : Ndumiso Ndlovu
For Barrick Gold Corporation : R Legh of Bowmans
For Randgold Resources Ltd : M Griffiths of Norton Rose Fulbright
For the Commission
: B Mabatamela and T Mahlangu
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