Hearings on the proposed merger between Glencore International and Xtrata have ended after South Africa’s electricity utility Eskom and labor unions withdrew complaints about the merger, South Africa’s Competition Tribunal said at the weekend.
According to the Wall Street Journal (WSJ), the Tribunal now has 10 days to deliver a ruling on the merger deal.
Tribunal spokeswoman Nandi Mokoena said the ruling could still result in conditions being imposed upon the merger.
The announcement removes some of the last few hurdles in the two companies’ quest to create the world’s fourth-largest diversified miner, with a market capitalization of about $80 billion.
It is understood that Glencore and Xstrata have already secured the backing of their shareholders and the European Union, but are still waiting for approval from competition authorities in South Africa and China.
The two companies on Friday said they have agreed to extend the legal deadline for their merger by six weeks to March 15, in order to provide more time to secure those approvals.
Macquarie Research mining analyst Jeff Largey told WSJ he wasn’t concerned by the delays in securing the regulatory go-ahead. “This deal will close, it’s just a question of timing,” he said.
Mokoena said the National Union of Metalworkers of South Africa (Numsa) withdrew its complaint after Eskom reached a settlement with Glencore which also met the union’s interests.
The union had been concerned that higher coal prices could result from the merger, hurting the profitability of other companies and their members’ interests. It also wanted to limit job layoffs due to the merger.
Eskom reached an agreement with Glencore that addresses the utility’s concerns about securing competitively priced coal supplies for its power stations.
Eskom produces about 90 percent of South Africa’s electricity generated from coal-fired power plants, and it had already complained to the state that coal producers are exporting too much and charging the utility too high a price.
Job losses that could result from the merger have drawn strong interest at a time when South African authorities are in talks with the country’s largest platinum producer, Anglo American Platinum (Amplats) over mine closures that could cost 14.000 jobs.
