The Competition Tribunal has prohibited the proposed sale of Sasol’s sodium cyanide business to Czech Republic-based manufacturer Draslovka, reaffirming the Competition Commission’s 2021 judgment to bar the transaction as anticompetitive.
The R163bn JSE-listed petrochemical major has a country monopoly on sodium cyanide, which is used as a solid or in solution to extract metal ores, and also in metal hardening agents and insecticides, making it essential to the country’s gold mining operations.
Through Draslovka’s local subsidiary, SA OpCo, the global sodium cyanide producer has been battling since 2021 to get regulatory approval for its bid to acquire the assets and liabilities of the business, located in Sasolburg, for R1.46bn.
The deal was dealt its first blow in November 2021 when the commission ruled that the proposed transaction was likely to result in a substantial prevention or lessening of competition due to inevitable post-merger price increases, which would be detrimental to customers.
“The commission finds that these price increases would be as a direct result of the proposed transaction,” it said. “The commission further finds that this transaction would have a substantial negative effect on the gold mining sector.”
The mining sector — a major contributor to GDP — relies on the firm to supply the chemical compound that is used in the extraction of precious metals such as gold and silver.
In terms of the proposed transaction, chemicals and energy giant Sasol would have supplied certain key inputs required in the production of sodium cyanide to Draslovka.
When the matter came before the tribunal, gold and platinum producer Sibanye-Stillwater was granted leave to intervene as an affected party, alongside DRD Gold, Pan African Resources and Harmony Gold.
The miners argued the applicant was downplaying the effect of the change in pricing, adding that importing liquid sodium cyanide was impossible and the solid equivalent was more expensive than sourcing from the national supplier.
Between March and July the tribunal heard arguments from all parties with the potential buyer vowing to inject $30m (about R565m) into a new plant or upgrades to existing infrastructure.
Draslovka has production and service facilities in the Czech Republic, SA, Australia, New Zealand and India. It makes speciality chemicals, including hydrogen cyanide, using proprietary manufacturing technologies.
The firm has warned there is a low to non-existent chance of exports kicking off without the merger.
Sasol said the parties involved were convinced that the transaction was in the interest of the cyanide business, its employees and SA customers “given that it is anticipated that Draslovka will contribute to the cyanide business operations and enhance its competitiveness”.
However, on Wednesday the tribunal said it had barred the deal.
The watchdog said a more detailed release would be issued in due course.
The African sodium cyanide market is expected to record an annual compound growth rate of about 3% from 2023-28, according to market intelligence and advisory firm Mordor Intelligence.
The battle for the sale of the cyanide business is not Sasol’s first rodeo, as the petrochemicals group has been embroiled in multiple cases with competition authorities.
After three excessive pricing complaints were filed in 2022, the commission earlier this year found that Sasol Gas had extracted markups of up to 72% for almost a decade and the excessive pricing is ongoing.
While the gas supplier has previously challenged the commission’s jurisdiction to investigate the matter, the body said that it had referred the case to the tribunal for prosecution.
With a dual listing on the JSE and New York Stock Exchange, Sasol cut its final dividend by almost a third to R10 in the year to June from R14.70 after a R35bn noncash impairment hit annual profit.
The Sasol share price was down 0.51% to R257.03 on Wednesday, having slipped more than 17% in the past year.
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