2005-11-11,+SASOL+-+U+can+turn+if+U+want+to,+Crotty,+Lourens

= Commission changes its tune on Uhambo merger = Business Report, Johannesburg, November 10, 2005

By Ann Crotty

Johannesburg - The anti-competitive effects of the proposed merger between Sasol's liquid fuels business and Engen to create Uhambo would not only be felt by the industry "but will also have a ripple effect in the South African economy as a whole", the competition commission told the competition tribunal in its closing arguments yesterday.

The commission, which had originally recommended conditional approval of the merger, said yesterday that it had come to the view that the horizontal competition concerns could not be addressed by attaching conditions to the merger.

"The commission is also not in a position, in light of the issues covered during the hearing, to confidently propose any structural remedy that would address the competition concerns."

The commission concluded: "In the circumstances, the tribunal may well consider it best to prohibit the merger due to the permanent structural changes the proposed merger will bring about in the relevant markets."

In their closing arguments, Sasol and Engen proposed a number of remedies in a bid to address the competition-related concerns. These included selling 13.64 percent of oil refinery Natref, which would reduce their holding to 50 percent.

In addition, they proposed some alterations to the component supply agreement between Sasol and Uhambo.

In terms of this agreement, Uhambo would have exclusive rights to Sasol's synfuel production for 10 years. The merging parties also proposed divesting of some of their service stations. However, the commission indicated that these proposals would not address concerns.

In its closing arguments, the commission stated that in the absence of the Uhambo deal, Sasol would be forced to lower its prices after the new fuel pipeline came into operation in 2010.

The commission also noted that the efficiencies claimed by the merging parties did not offset the anticompetitive effects of the proposed merger.

It also dismissed claims that the proposed merger would make it easier and less expensive for the empowerment partners to raise capital and buy equity.

From: http://www.busrep.co.za/index.php?fArticleId=2988273

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Business Day, Johannesburg, 10 November 2005 Carli Lourens, Trade and Industry Editor
 * Competition body gets cold feet on Sasol deal**

PROSPECTS for a mooted merger between Sasol Oil and Engen to form SA’s largest fuel company were dealt a blow yesterday when the Competition Commission made an about-turn, saying it no longer supported the deal.

The commission recommended the merger to the Competition Tribunal earlier this year, subject to certain recommendations. But it was forced to change its mind at the tribunal hearings as opponents of the deal raised pertinent questions on its shortcomings.

Yesterday’s about-turn also brought to the fore issues of capacity within the commission as these queries could have been picked up before it made the recommendations. It also reduced business confidence in the regulatory body.

The about-turn came despite offers by the merging parties to sell some of the merged entity’s fuel-production capacity and service stations in an attempt to quell the commission’s new concerns. Legal counsel for the commission said it had made a mistake by not assessing properly the horizontal effects of the deal, which it earlier said could have a profound effect on the domestic economy.

Prospects for the merger looked even bleaker after tribunal chairman Dave Lewis (pictured above) questioned government’s capacity to act swiftly against potential anticompetitive behaviour by the merged entity, Uhambo Oil.

Sasol and Engen have proposed a range of remedies, such as selling part of the Natref inland refinery, selling fuel stations, and capping retrenchments at 453 for two years after the merger, among other things, in a bid to push the deal through. But the commission now says it believes that no remedies could address its anticompetitive concerns.

Legal counsel for the merging parties Fanie Cilliers said it was “difficult to see why the commission had changed its stance”.

In the merging parties’ final arguments, Cilliers said the companies opposing the deal — BP, Shell, Total, Chevron and Masana — had dressed up their own interest as competition concerns. He said much of their argument comprised theories that were not based on evidence and should, therefore, not be considered as reasons to prohibit the merger.

One of the main concerns most opposing oil companies voiced earlier was that Uhambo would restrict sales to them in the inland area where they did not have refining capacity.

From: http://www.businessday.co.za/articles/topstories.aspx?ID=BD4A111135