Natural Resource Investment and Africa’s Development

Natural Resource Investment and Africa’s Development

New Horizons in Environmental and Energy Law series

Edited by Francis N. Botchway

This well-researched book covers a wide spectrum of important issues that are central to investment in natural resources and ultimately, economic development of Africa.

Chapter 6: Mergers and Acquisitions in Resource Industry: Implications for Africa

Francis N. Botchway

Subjects: environment, environmental law, law - academic, environmental law, law and development

Extract

1 Francis N. Botchway 1 INTRODUCTION After contentious bids to acquire one another in mid-2009, BHP Biliton and Rio Tinto, both Australia based mining giants, settled for a joint venture arrangement.2 This came about after an initial effort by Chinese state-owned Chinalco to partner Rio Tinto failed.3 In June 2009, Xstrata, a Swiss mining company, made an estimated £41 billion merger overture to its rival, London and South Africa based Anglo American.4 This was the second major merger effort from Xstrata in as many months after its bid to acquire rival Lonmin failed because it could not raise the necessary finance in the middle of the global financial downturn.5 The South African government is reluctant to endorse the merger of Xstrata and Anglo American.6 The reasons cited by the Mining Minister include the impact of the merger on jobs, competition and the larger South African economy.7 Anglo American itself has rebuffed the offer but Xstrata insists that a merger of the two will make more than £1 billion in efficiency savings.8 The underlying philosophies of South African competition law and policy are efficiency and equity.9 Whereas the latter is more peculiar to South Africa, given the history of apartheid and so on, efficiency seems to be the cornerstone of almost all competition regimes. The question that this chapter confronts is: in what ways do the waves of mergers and acquisitions affect the goals of competition law in the African context? Specifically, how do the mergers of transnational natural resource businesses...

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