Sanction of the Xstrata Glencore merger challenged


The proposed merger between giants Glencore and Xstrata goes to a shareholder vote on 20 November, as processes continue assessing the monopolistic concerns the merger brings.

Whilst the European Union is still considering the merger in terms of its anti-trust regulations, it has advised Glencore to spin off some of its zinc assets. In South Africa, while the Competition Commission has recommended approval of the merger contingent upon certain conditions being met by Glencore, NUM, NUMSA and South Africa’s energy utility Eskom have lodged intervention applications appealing against the Competition’s recommended approval. The Competition Tribunal will hear the applications on 10 to 14 December 2012.

Glencore is a leading global trader in a number of key commodities including coal that also has shareholding interests in mining production of coal and anthracite. Xstrata is one of world’s largest exporters of thermal coal and one of the largest producers of coal used to make steel. In South Africa there is overlap, as both are miners of thermal coal and in the service of coal traders for export of their production.

IndustriALL Global Union has publicly condemned the deal, it has participated in protests against the deal and has requested meetings with Glencore that were rebuffed by CEO Ivan Glasenberg.

The National Union of Mineworkers (NUM) raised concerns to the Commission stating “Glencore as a bigger producer will probably fix prices for all the targeted firms as opposed to current individual operations who have latitude to agree on a price with a purchaser of the mineral”. The NUM also opposed the retrenchment of 180 workers that would arise from the merger and took issue with the fact that over 50 per cent of the merging parties’ workforce are contract workers. Thus more than 9,000 workers have no job security and are put at risk by the merger.

Eskom is highly critical of Glencore that it is establishing itself as the gate keeper of South Africa’s coal exports and says it has little interest in developing and maintaining the South African domestic market. It claims that Glencore’s philosophy is diametrically opposed to that of Eskom and the public interest, “Eskom perceives Glencore’s end game to be the introduction of an export market related price factor for coal”.

The National Union of Metalworkers of South Africa (NUMSA) has also submitted an intervention application citing concerns in line with Eskom’s submission on the increased risk to coal supply and price, undermining the utility’s ability to generate electricity on a reliable, stable and sustainable basis. Numsa charges that the Commission has not given sufficient consideration to the likely risks on downstream industries in the value chain, especially those that are energy intensive users.

Numsa also raises the issue that the recent retrenchment of 295 workers at Siltech, a subsidiary of Glencore, was omitted by parties deliberately to reduce the stated effect on jobs of the merger and was not considered by the Commission.

IndustriALL Global Union supports NUMSA, NUM and Eskom in their intervention applications to the South African Competition Tribunal and wish to remind the Tribunal and the Xstrata Shareholders who will be voting on the deal next week that a vote in favour of the deal is a vote for Greed.