JOHANNESBURG--South Africa's competition regulators will open
Friday a hearing on the merger of Glencore International PLC
(GLEN.LN) and Xstrata PLC (XTA.LN) that is one of the last hurdles
for the deal to create the world's fourth-largest diversified
mining company.
The deal needs only regulatory approval in South Africa and
China to move ahead, after already receiving the backing of
shareholders in both companies and the European Union last
month.
Glencore and Xstrata will face stiff demands from South Africa's
main electricity provider and unions at the hearing, which is due
to start at 0700 GMT and run through Jan. 28.
South Africa's state-owned electricity provider, Eskom Holdings
Ltd., previously said it will seek to protect its ability to obtain
sufficient and competitively priced coal. The National Union of
Metal Workers said it will seek limits on layoffs.
The possible job losses that could result from the merger has
drawn strong interest at a time when South African authorities are
in talks with the country's largest platinum producer, Anglo
American Platinum Ltd. (AMS.JO), over a proposed restructuring that
would cost 14,000 jobs.
"The Competition Commission assessed the merger and concluded
that although the transaction was unlikely to cause a substantial
lessening in competition, it raised public interest concerns
because the merging parties intended to retrench a number of
employees," the Competition Tribunal said in a statement this week
about the Glencore-Xstrata deal.
South Africa's competition authorities have placed conditions to
approval on previous mergers when jobs were at stake. When it
approved Wal-Mart Stores Inc.'s acquisition of a majority stake in
South African retailer Massmart Holdings Ltd. earlier this year,
the combined entity had to refrain from job cuts for the first two
years, honor union bargaining agreements for three years and fund
small-business development.
South Africa's Competition Commission, which makes the initial
decision on whether a merger will be allowed, recommended to the
Competition Tribunal, where a final decision will be made, that the
combined Glencore-Xstrata business be allowed limited layoffs for
the first two years and that is should also fund a
skills-development program.
Eskom produces about 90% of the country's electricity through
coal-fired power plants. The utility says it doesn't want to block
the merger, but is concerned about the repercussions for its coal
supply. Already the utility has complained to the state that coal
producers are exporting too much and charging too high a price.
In the past few years, Glencore has been adding to its coal
production in South Africa, acquiring a majority ownership of the
country's sixth-largest producer this year. South Africa is the
world's seventh-largest coal producer. Glencore previously said
that it saw demand from Eskom as a driver to its investment.
Write to Devon Maylie at devon.maylie@dowjones.com
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