Competition Tribunal scrutinises Sasol’s sodium cyanide assets deal with Draslovka

Energy and chemicals company Sasol is battling it out with SA’s competition watchdog as the group pursues the green light to sell its sodium cyanide business to Draslovka — a local subsidiary of a Czech Republic-based producer — two years after the commission barred the merger.

The Competition Tribunal  is hearing oral evidence this week from merger parties, experts and gold miner Sibanye-Stillwater on the implications of the proposed R1.4bn transaction.

The transaction, which would see Draslovka acquire the assets and liabilities of Sasol’s sodium cyanide business, including its plant that makes the chemicals, was prohibited by the Competition Commission in November 2021 on grounds that it was likely to prevent or reduce competition due to post-merger price increases, which would be detrimental to customers.

The commission also argued that the merger would have a substantial negative impact on the gold mining sector, which relies on Sasol to supply the poisonous chemical compound used in the extraction of precious metals such as gold and silver.  

Sasol is the sole producer of liquid cyanide in SA.

The watchdog argued that the cost of converting the solid form to liquid was significant when compared with the liquid form, and so the two were not substitutable.

The merger parties hit back and filed an application to the tribunal based on several grounds, including that the commission had not considered the efficiencies and public interest benefits arising from the proposed transaction.  

Sasol told Business Day on Tuesday the decision to bar the transaction was unexpected as Sasol and Draslovka had engaged with the commission throughout the review process. The pricing effects issue had been fully evaluated by the commission during these engagements.

“Notably, the pricing effects issue was raised again only on the day that the decision was due to be issued, and therefore afforded the parties very limited time to engage the commission,” Sasol said.

Draslovka has production and services facilities in the Czech Republic, SA, Australia, New Zealand and India. It makes speciality chemicals, including hydrogen cyanide, using proprietary manufacturing technologies.

The family-owned private company’s first foray into Africa was in 2021 when it agreed with Sasol to acquire its sodium cyanide business, located in Sasolburg for R1.46bn.

Draslovka CEO Pavel Bruzek said the acquisition, which forms part of its international expansion plans, would allow the company to better serve the SA mining and associated industries. In the longer term, it would also enhance SA’s exports and provide greater access to Draslovka’s top agricultural materials.

“In addition to our initial investment, we plan to invest a further $50m into modernising the facility, expanding the plant and ensuring it meets our world-leading environmental standards. This will allow us to enhance our offerings into products that are now imported into SA from other countries,” said Bruzek.

Sasol said the parties are convinced the transaction is in the interests 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”.

Draslovka said it had partnered with Navuka Investment Holdings as its broad-based BEE partner, which would own 25% plus one share of the SA operations should the deal receive the necessary regulatory approvals.

Gold miner Sibanye-Stillwater has been granted leave to participate in the tribunal proceedings after it applied for intervention. Any party who has a material and substantial interest in a matter can formally apply to the tribunal to participate in proceedings. The tribunal can also consider a party’s ability to assist in its consideration of the matter.

The tribunal said it granted Sibanye leave to intervene so it could offer insight into the possible ripple effects of the expected price increases on the gold mining sector.

The JSE-listed mining group is also expected to weigh in on the likelihood that the merger will give rise to uncertainty or  insecurity of liquid sodium cyanide supply in SA and its impact on the mining sector in terms of the Competition Act.

The hearing, which began on Monday, is expected to wrap up on Wednesday.

Sasol reassured on its commitment to safety until the matter is resolved, adding that all its cyanide business employees would remain on its books.

gumedemi@businesslive.co.za