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Competition   A permanent structural shift

South Africa prohibit merger between only two andalusite manufacturers

AndalusiteThe Competition Commission welcomes a decision by the Competition Appeal Court to uphold its earlier decision to prohibit a merger between South Africa’s only two andalusite manufacturers.

In January 2015, Imerys South Africa and Andalusite Resources notified the Commission of an intermediate merger whereby ISA would acquire AR.

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The Commission prohibited the merger in April 2015 on the basis that the merger would give rise in a substantial lessening or prevention of competition in the andalusite market.

Andalusite is a mineral from which refractories are made. Refractories are used to line furnaces, kilns and other containers exposed to high temperatures, abrasion and chemical attack in the course of manufacturing iron, steel, cement, ceramics and other products.

Locally and internationally andalusite is largely used by inter alia steel producers. The merger, if approved, would have resulted in a “two to one” merger to monopoly in the South African andalusite market (and also a near monopoly in the global supply of andalusite).

ISA and AR are the only miners and suppliers of andalusite in South Africa. The only other significant producer of andalusite is Andalucita in Peru. There are also high barriers to entry in the South African andalusite market.

In the circumstances the Commission found that the proposed transaction would involve a permanent structural shift in the domestic market, resulting in significant and permanent anti-competitive and public interest effects.

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