THE completion of the merger process between commodities trader Glencore and Xstrata has been pushed out to March 15 from January 31 due to the remaining regulatory processes in South Africa and China.
Xstrata will become a wholly owned subsidiary of Glencore after the conclusion of the transaction. Xstrata is the largest seaborne exporter of thermal coal used to generate electricity.
South Africa’s Competition Tribunal on Friday concluded its hearing into the $33bn transaction, but will only make its decision known at a later stage.
The hearing was initially scheduled for Friday and most of next week, but came to a quick conclusion when the interveners — national electricity utility Eskom and the National Union of Metalworkers of South Africa — withdrew their intervention applications following an agreement between Eskom and the merged entity.
Glencore said in a statement on Friday afternoon that it was scheduled to release its preliminary results for the year ended December 2012 on March 5, and the new long stop date would allow it the flexibility to complete the merger after the release of the results.
It said the completion of the transaction remained conditional on regulatory approvals in China and South Africa.
The Competition Commission has recommended a conditional approval of the transaction, relating to a cap on merger-related job losses.
Eskom said it was satisfied with the agreement reached with commodity trader Glencore to secure long-term coal supplies at affordable prices given the fact that coal was its biggest expense in generating electricity.
The utility had been concerned that the merger could jeopardise its ability to source coal of sufficient quality at affordable prices for the Hendrina, Komati and Majuba power stations, which were supplied by Glencore and Xstrata.
Hilary Joffe, spokeswoman for Eskom, said the agreement established a framework within which Glencore and Eskom could co-operate on a "mutually beneficial basis". The agreement would govern their interactions regarding existing and future coal supplies, she said.
Eskom already had long-term contracts with Glencore, in some instances spanning the lifetime of the power stations.
The National Union of Mineworkers (NUM) had previously reached an agreement with the merging parties regarding future retrenchments that are merger-related. The agreement boils down to no retrenchments for two years following the approval of the transaction and a cap on the number of retrenchments if there is a need for retrenchments after the two years.
The Competition Commission was not satisfied by the ruling of the tribunal to keep the agreement confidential and to include it only in the records of the tribunal.
Deputy commissioner Thembinkosi Bonakele said the commission would like to be able to talk about the agreement freely and, having looked at the agreement again, it seemed the confidentiality claimed could not be sustained by the confidentiality provisions in the Competition Act.
Tribunal chairman Norman Manoim said it was not an issue that had to be dealt with at the moment.
Glencore and Xstrata are both listed on the London Stock Exchange and based in Switzerland.