The proposed merger between Gupta-owned junior coal mining company Tegeta Exploration and Resources and Glencore-owned Optimum Coal Mine has been approved with conditions by South Africa’s Competition Commission.
Tegeta is owned by Oakbay Investments and Mabengela Investments, while Optimum Coal is controlled by Optimum Coal Holdings. Both Tegeta and Optimum are currently in business rescue.
“The Competition Commission’s recommendation that this deal is approved is good news for all of Optimum’s employees,” says Oakbay Investments chief executive Nazeem Howa.
As the Commission’s recommendation states, the transaction will not substantially prevent or lessen competition in the thermal coal market, Howa said in statement.
Oakbay says that it is commitment to the future success of the business and to its employees adding that the Optimum acquisition has prevented a liquidation that would have seen 3 000 people lose their jobs.
As per the transaction, Tegeta will pay a consideration of approximately R2.15 billion for the assets of Optimum Holdings, the proceeds of which will be used to part settle the existing bank debt of Optimum Holdings of approximately R2.55 billion.
Glencore has agreed to advance approximately R400 million to Optimum Holdings in order to settle the balance of the bank debt so that the transaction can be implemented.
The transaction will preserve jobs at Optimum mine and secure the coal supply to Eskom’s Hendrina power station, in Mpumalanga. It will also allow the joint business rescue practitioners (BRPs) of Optimum Coal Holdings, Piers Marsden and Peter van den Steen, to concurrently terminate the business rescue proceedings of Optimum Holdings and Optimum Mine.
It is expected that following such termination, Optimum mine will continue to operate in the ordinary course of business. as a going concern under the ownership of Tegeta.
The assets in the transaction include Optimum coal mine, Optimum coal terminal and Koornfontein Mines.