98/335/EC: Commission Decision of 23 April 1997 declaring a concentration to be compatible with the common market and the functioning of the EEA Agreement (Case No IV/M.754 - Anglo American Corporation/Lonrho) (Only the English text is authentic) (Text with EEA relevance)
Date: 1997-04-23
Institutions: European Commission
Subjects: European Economic Area, company with share capital, economic concentration, merger control, share

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 23 April 1997

declaring a concentration to be compatible with the common market and the
functioning of the EEA Agreement

(Case No IV/M.754 (cid:190) Anglo American Corporation/Lonrho)

(Only the English text is authentic)

(Text with EEA relevance)

(98/335/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community,

Having regard to the Agreement on the European Economic Area, and in particular Article
57 thereof,

Having regard to Council Regulation (EEC) No 4064/89 of 21 December 1989 on the
control of concentrations between undertakings (1), as amended by the Act of Accession of
Austria, Finland and Sweden, and in particular Article 8(2) thereof,

Having regard to the Commission Decision of 16 December 1996 to initiate proceedings
in this case,

Having given the undertakings concerned the opportunity to make known their views on
the objections raised by the Commission,

Having regard to the opinion of the Advisory Committee on Concentrations (2),

Whereas:

(1)

On 14 November 1996 Anglo American Corporation of South Africa Limited
(‘AAC') notified the Commission of the acquisition of a 24,98 % shareholding in
Lonrho plc (‘Lonrho').

(1) OJ L 395, 30. 12. 1989, p. 1; corrected version OJ L 257, 21. 9. 1990, p. 13.
(2) OJ C 155, 20. 5. 1998, p. 27.

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(2)

(3)

After examination of the notification, the Commission has concluded that the
notified operation falls within the scope of Council Regulation (EEC) No 4064/89
(‘the Merger Regulation') as AAC, through the operation, acquired sole control of
Lonrho within the meaning of Article 3(1)(b) of
the Merger Regulation. The
Commission decided to initiate proceedings in application of Article 6(1)(c) of the
Merger Regulation on 16 December 1996.

By means of a provisional decision dated 5 December 1996, the Commission
ordered interim measures to effect the suspension of the concentration pursuant to
Article 7(2) of the Merger Regulation. These interim measures were confirmed by
the Commission by way a of a final decision, pursuant to Article 7(2), dated 7
February 1997.

[ . . . ] (1)

I. THE PARTIES

A. AAC and its group of companies

A.1. Anglo American Corporation of South Africa Limited and De Beers

Consolidated Mines Limited

(4)

AAC is a diversified South African company involved in mining, finance, commerce
and industry. AAC has its headquarters in Johannesburg and its shares are listed on
several stock exchanges including those of Johannesburg, London, Frankfurt and
Zurich. AAC was incorporated in 1917, on the initiative of Ernest Oppenheimer,
whose family has been significantly involved in its day-to-day management ever
since. The Oppenheimer family has similarly been involved with De Beers Consoli-
dated Mines Limited (‘DBCM') since the beginning of the 20th century. These two
companies have been the basis for the creation of South Africa’s largest mining
finance house.

(1) In the published version of

replaced by approximated figures, pursuant
concerning non-disclosure of business secrets.

this Decision, some information has hereinafter been omitted or
to Article 17(2) of Regulation (EEC) No 4064/89

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(5)

(6)

(7)

(8)

(9)

There is a substantial cross-shareholding between
AAC and DBCM. In fact, the main shareholder of
AAC is DBCM holding 38,4 %. Conversely AAC is
the main shareholder in DBCM with 32,5 %. The
boards of directors of AAC and DBCM have a large
degree of overlap, with seven out of DBCM’s 15
directors also being on the AAC board and the
same persons holding the posts of Chairman and
Deputy Chairman in both companies. In its notifi-
cation AAC indicated that the shareholdings of
AAC and DBCM in Lonrho should be amal-
gamated for the purposes of the operation.

larger

shareholders

in AAC are South
Other
African Mutual Life Assurance Society (‘SA Mutual')
(8,9 %) and Standard Bank Nominees (Tvl)
(Pty)
Limited (7,5%). In addition, The Southern Life
Association Limited (‘Southern') holds 1,6 % of
AAC’s shares. The other larger shareholders in
DBCM are broadly identical
to those of AAC.
Thus, SA Mutual and Standard Bank Nominees
both hold 9,4 % of DBCM’s shares. Other com-
panies holding in excess of 5 % of DBCM’s shares
are CMB Nominees (Pty) Limited (6,8 %) and
Debswana Diamond Company
(Pty) Limited
(5,3 %), a company which is indirectly jointly
controlled by AAC.

AAC and DBCM hold investments
in a vast
number of direct and indirect subsidiaries, asso-
ciated companies and other investments in mining,
finance, commerce and industry in South Africa
and world-wide. However, the following appraisal
of the AAC group will be confined to assessing
those relationships which are of importance when
assessing AAC’s acquisition of shares in Lonrho.

A.2. Central Holdings Limited, Central Hold-
and E.
International Limited
ings
Oppenheimer & Son (Pty) Limited

The third largest shareholder in AAC is Central
Holdings Limited (‘CHL'), holding 8 % of
the
shares. CHL is wholly owned by Central Holdings
International Limited (‘CHIL'), a Liberian company
[ . . . ]. CHIL serves as a vehicle for holding shares
[ . . . ]. The Commission has sought to establish the
complete nature of these holdings and has been
informed that CHIL holds a wide variety of invest-
ments. However, no detailed information as to the
exact extent of these holdings has been provided.
CHIL’s board consists of [ . . . ] members, [ . . . ] of
whom are also on AAC’s board.

AAC has, in one submission to the Commission,
acknowledged that ‘[[ . . . ] members of the boards
of AAC and/or DBCM] are also on the board of
CHL, E. Oppenheimer & Son (Pty) Limited (“EOS”)
[which is a subsidiary of CHIL] or other companies
controlled by the Oppenheimer family', and that a

number of the directors on the AAC and DBCM
boards are paid by EOS, which,
in some cases,
recovers their remuneration from AAC and DBCM.

(10) AAC has subsequently stated that EOS and CHIL
are not controlled by the Oppenheimer family and
that ‘nothing contained in [the referred submission]
was intended to imply that they are so controlled'.
the shareholdings, directorships and
In view of
historical presence of the Oppenheimer family, in
both AAC and DBCM, the Commission has, in
several questionnaires, addressed to CHIL and the
Oppenheimer
to establish the
complete nature of the Oppenheimer family’s rela-
tionships with, and the question of whether the
family has the possibility of exercising decisive
influence over, CHIL, AAC and DBCM.

family sought

(11) As most of these questions have not been fully
answered, the Commission can only conclude that
a possibility remains that further links and hold-
ings of relevance to this assessment may exist.
the
However as AAC,
Commission’s statement pursuant to Article 18 of
the Merger Regulation, has conceded that, based on
contractual arrangements, is able to procure that
CHIL will vote its shares in Lonrho as instructed
by AAC, the question as to the complete nature of
the Oppenheimer family’s holdings can be left
open.

following the receipt of

A.3. The Southern Life Association Limited

(12)

Southern is a life assurance company listed on the
Johannesburg stock exchange. AAC’s annual report
for 1996 defines Southern as an ‘associate' of AAC
(as is DBCM). Associates are defined as ‘long-term
investments in which the group holds between
20 % and 50 % of the equity capital and thereby
has the ability to participate in their financial and
operating policy decisions.'

(13) AAC has a 40,1 % direct

interest

in Southern.
Moreover, the Chairman as well as one of two
Deputy Chairmen and four out of 17 members of
Southern’s board are appointed by AAC. Moreover,
according to the figures provided by Southern and
AAC, AAC’s
shareholding constituted a clear
majority of the total number of shares of the share-
holders that attended Southern’s AGMs in 1994,
1995 and 1996.

(14)

Furthermore, AAC and DBCM have a 26,1 %
shareholding and a number of directors (including
the Deputy Chairman) on the board of First
National Bank Holdings Limited, which has a
28,9 % direct shareholding in Southern (conversely
Southern has a 24,4 % direct shareholding in First
National Bank). As with Southern, First National

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20. 5. 98

Bank is defined as an ‘associate' of AAC. Only one
other major shareholder of Southern has been iden-
tified being a 6 % holding by First National
Nominees (most of which shares are held for the
benefit of [ . . . ]) but which is also known to act as a
nominee company for Southern. Therefore, more
than 60 % of Southern’s shares are directly or
indirectly connected to AAC.

agreement was, however, cancelled and
latter
replaced by an option agreement dated 15 March
1996, setting out call and put options in relation to
44 011 814 (5,62 %) of the Lonrho shares. Simulta-
neously, SBCW entered into a similar option agree-
ment concerning the balance of the Lonrho shares
acquired by it
(1 517 633 (0,19 %)) with CHIL.
Both options were exercised on 9 April 1996.

(15) Despite the above facts, AAC maintains that it is
not in a position to procure that Southern will vote
its shares in Lonrho as instructed by AAC. The
Commission, however, cannot accept
this argu-
ment. Instead it has to be concluded that AAC, by
way of its shareholdings and board representations,
is in a position to exercise decisive influence over
Southern. The reasons for this conclusion will be
further explained in Section II below.

B. Lonrho

(16)

Lonrho is an UK company active in mining, agri-
culture, trading and property. Lonrho is based in
London and is listed on the London and Johannes-
burg stock exchanges.

(20) On 12 April 1996 the right of first refusal granted
to AAC on 13 March 1996 was replaced by two
new agreements between AAC and Laerstate/Mr D.
Bock; one option agreement relating to the 143
478 260 Lonrho shares, and one supplemental
the conditions
agreement, setting out
relating to the option. This option was
sub-
sequently exercised on 7 November 1996.

in detail

(21) A resolution of the directors of AAC, dated 13
March 1996, provides insight into the reasons why
the
first option agreement with SBCW was
replaced by two others on 15 March 1996.
According to the resolution there had been an
agreement between AAC, CHIL and DBCM to
share, amongst themselves, the Lonrho shares [ . . . ]
whereby AAC would hold [ . . . ] of
the shares,
CHIL [ . . . ] and DBCM [ . . . ].

II. THE OPERATION

(22)

(17)

The operation consists of the acquisition by AAC,
related companies, of 24,13 % (1) of
and its
Lonrho’s shares. The operation was carried out in
several steps between March and November 1996,
and was based on a number of agreements, as
described below. However, as these steps were
interrelated it is appropriate to consider them as
one single operation for the purposes of this assess-
ment.

Following receipt of the Commission’s statement
pursuant to Article 18 of the Merger Regulation,
AAC has conceded that, based on this agreement, it
is able to procure that DBCM and CHIL will vote
their shares in Lonrho as instructed by AAC, and
that,
therefore their combined shareholding of
25,84 % (being all the shares acquired pursuant to
the agreements and on the stock market) should be
amalgamated to assess the question whether the
operation results
in a change in control over
Lonrho.

A. Agreements

(18) As a first step AAC entered into an agreement on
13 March 1996 with Mr D. Bock, Lonrho’s then
chief executive, and Laerstate BV (‘Laerstate'), a
company controlled by Mr Bock. In this agreement
AAC agreed to procure the purchase of 45 529 447
(5,81 %) Lonrho shares, and, as consideration for
agreeing to this, AAC was granted a right of first
refusal in relation to 143 478 260 (18,32 %) Lonrho
shares held by Laerstate.

B. Previous holdings and other transactions

(23) On 1 April 1996, AAC,

in conjunction with
DBCM, acquired 12 566 671 (1,60 %) shares, and
CHIL 433 329 (0,06 %) shares, in Lonrho on the
stock exchange. These purchases of a total of
13 000 000 shares were apportioned in the same
way as those shares acquired pursuant to the option
agreements.

(19) As an intermediate step, also on 13 March 1996,
the 45 529 447 shares were acquired from Laerstate
by Swiss Bank Corporation, acting through its
Warburg division, (‘SBCW'). Furthermore, also on
13 March 1996, AAC and SBCW entered into an
option agreement relating to all these shares. This

(24)

Prior to the concentration described above AAC
held,
indirectly through Southern, 13 132 218
(1,68 %) (2) shares in Lonrho. As described above,
AAC disputes that these shares should be amal-
gamated with those of AAC, DBCM and CHIL for
the purposes of this assessment.

(1) The

total number of
783 183 106 (1 February 1997).

shares

issued by Lonrho being

(2) On 7 February 1997, Southern held 12 713 718 shares (cid:190)

1,62 %.

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several

(25) However, the Commission cannot accept this view
for
indicated above
reasons. Firstly, as
AAC’s share holding in Southern (40,1%) con-
stituted a clear majority of the total number of
shares of the shareholders that attended Southern’s
AGMs in 1994, 1995 and 1996. Secondly, AAC
itself has contractually undertaken in the option
agreements between AAC and Laerstate/Mr D.
Bock of 12 April 1996 that [ . . . ] (1). Finally, AAC
has provided no comprehensive explanation how
its views are compatible with its own definition of
Southern in AAC’s annual report as a company in
which AAC has the ability to participate in its
financial and operating policy decisions.

(26)

(27)

(28)

C. Conclusion

Through the operation, and on the basis of the
agreements described above AAC, in conjunction
with CHIL and DBCM, acquired a total of
189 007 707 (24,13 %) Lonrho shares. Taking into
account the shares previously held by Southern and
those acquired on the stock exchange the total
holding of Lonrho shares which AAC will be in a
amounted to 215 139 925
position to control
(27,47 %) shares after
the operation. As noted
above it is possible that either the Oppenheimer
family, the [ . . . ] or CHIL own further shares in
Lonrho: given the opacity of the answers to its
questions the Commission is unable to conclude
whether further shares should be added to this total
or not.

that

the
The Commission therefore concludes
combined shareholdings in Lonrho of, at
least,
AAC, DBCM, Southern and CHIL (27,47 %)
should be amalgamated when assessing whether
AAC, on a de facto basis, has acquired solely, or
jointly with DBCM and CHIL, the possibility to
exercise decisive influence, and therefore control,
over Lonrho.

III. THE CONCENTRATION

In its notification AAC argued that its acquisition
of shares in Lonrho did not constitute a concentra-
tion within the meaning of the Merger Regulation.
The basis for this argument was twofold. First, AAC
argued that it is not in a position to procure that
Southern or CHIL vote the shares held by them in
Lonrho in any particular manner. Subsequently
AAC has conceded, and now accepts that it is able

(1) The combination of AAC’s contractual ability, together with

other factors, supports the final conclusion.

shares as
to procure that CHIL will vote its
instructed by AAC. Furthermore, as described
above the Commission cannot accept AAC’s argu-
ments concerning Southern.

(29) AAC’s second argument was largely based on its
contention that it could not procure that CHIL or
Southern would vote their Lonrho shares in any
particular manner. On this basis AAC argued that
the question as to whether its acquisition of shares
in Lonrho constitutes a concentration within the
meaning of the Merger Regulation should be based
on the accumulation by AAC and DBCM of an
aggregate 24,98 % in Lonrho (including all shares
held by AAC and DBCM at the time of the noti-
fication). Although AAC has now conceded that
the figure to be used should be 25,84 %, it main-
tains that this holding is insufficient to place AAC,
and its related companies, in a position where they
have the possibility of exerting decisive influence
over Lonrho.

(30) As set out above, the Commission considers that
the question of whether the operation results in a
change in control over Lonrho should be assessed
on the basis of a total holding of 27,47 %. As will
be shown below, evidence from polls held at
Lonrho shareholders’ meetings during the period
1993-96 shows that a holding of 27,47 % would
have been sufficient to command consistently more
than 50 % of votes cast; consequently the opera-
to a concentration within the
tion amounts
meaning of Article 3 of the Merger Regulation.

A. Sole control by a ‘qualified minority'

shareholder

(31)

in paragraph 14, sets out

The Commission’s notice on the notion of a
concentration (2),
the
factors for determining whether sole control exists
in the case of a ‘qualified minority' shareholder. It
is stated in the notice that control will arise for
example where the minority shareholder has the
ability to achieve a majority in a shareholders’
meeting, given that the remaining shares are widely
dispersed among a number of shareholders. The
Commission has applied this policy in a number of
decisions (3).

(32)

Set out in Annex 1 is a summary of the voting at
Lonrho shareholders’ meetings during the period
1993-96 at which an issue has been decided on a
poll of shareholders. As can be seen from Annex I,
the 27,47 % shareholding would have amounted to

(2) OJ C 385, 31. 12. 1994, p. 5.
(3) IV/M.025 (cid:190) Arjomari-Prioux SA/Wiggins Teape Appleton plc;
IV/M.343 (cid:190) Soci(cid:130)t(cid:130) G(cid:130)n(cid:130)rale de Belgique/G(cid:130)n(cid:130)rale de
Banque; IV/M.613 (cid:190) Jefferson Smurfit Group PLC/Munksjo
AB; IV/M.731 (cid:190) Kvaerner/Trafalgar.

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Official Journal of the European Communities

20. 5. 98

a majority of the votes cast at all these meetings
with the exception of the 1995 AGM. It is also seen
from Annex I that, in the past three years, the
number of shares voted at the general meetings of
shareholders has represented less than 55 % of the
share capital except at the meeting concerning the
contentious issue of the appointment of Mr R. W.
Rowland as President where the shares voted repre-
sented 63 % of the share capital.

(33) AAC has argued that the only reliable method to
test the influence of a shareholder is by reference
to resolutions on contentious matters. Therefore,
according to AAC, the voting on the resolution to
appoint Mr R. W. Rowland as President of Lonrho
is the appropriate test of whether AAC will control
Lonrho. Therefore, AAC in its view does not
control Lonrho.

(34)

The rejection of the resolution to appoint Mr R. W.
Rowland President of Lonrho is exceptional and is
not relevant
for the assessment of control and,
consequently, can not be taken as a guide for future
voting patterns. The resolution was exceptional due
to two facts. Firstly, the resolution did not concern
a commercial issue, since Mr R. W. Rowland would
not have been a director and the Presidency should
more properly be described as an honorary post.
Secondly, the board had first endorsed the resolu-
tion, but
later decided, after having ousted Mr
R. W. Rowland from the board, to recommend that
shareholders vote against the resolution. In turn the
resolution was voted down on the recommendation
of
the board by 29,5 % for the resolution and
3,4 % against. The biggest shareholder at the time
was the then new Managing Director and Chief
Executive Mr D. Bock, holding 18,6 % of Lonrho’s
shares. Mr D. Bock had a contractual obligation to
vote his shares for the resolution but, following the
dispute, Mr D. Bock and the Lonrho board unani-
mously agreed to recommend that shareholders
vote against
the
Commission this recommendation and the sub-
sequent voting on this resolution, demonstrates the
influence of the largest shareholder on the board of
Lonrho.

the resolution. In the view of

(35) AAC has also argued that there is a trend towards
in Lonrho and
rep-

more institutional
therefore the proportion of

issued shares

shareholders

resented at general meetings will continue to
increase. The implication is that
in the future
AAC’s shareholding would not be expected to
represent more than 50 % of the votes cast. In the
view of the Commission the proportion of institu-
tional shareholders may have increased in the last
three years. However, contrary to AAC’s argument
there is no clear trend in the number of shares
represented at
the general meetings of Lonrho
shareholders (1). It cannot, therefore, be concluded
that the number of shares represented at general
meetings of shareholders in the near future will be
substantially different from those in the near past.

(36)

(37)

Furthermore, AAC has argued in its response to the
to Article 18
Commission’s statement pursuant
(‘the Response'), that convertible bonds due in 2004
and 2006 and potentially representing 57 590 096
shares (7,4 % of the current share capital) have
been issued. These bonds have the potential to
further dilute AAC’s shareholding, since AAC does
not hold any of these bonds. However, the conver-
sion price is about 196 pence per share, whereas
the current share price is only about 140 pence per
share. The share price may or may not increase in
the future, but in the short term it does not seem
likely that there will be an incentive to convert
these bonds to shares. In any case AAC would be
able to adjust it own shareholding correspondingly
by purchasing shares in the market.

Finally, AAC has argued that the Lonrho board
could resist any attempt by AAC to nominate a
majority of the board by rallying the support of
institutional investors, other shareholders and the
financial press. However, in reality the board would
be in a precarious position, if it were to challenge
AAC, since it would have to rally the support of a
large number of shareholders, on which it would
have to rely for their continuous support. This
cannot be taken for granted, since even the body of
institutional shareholders can change quite dramat-
ically within a short period of time. Between July
1996 and February 1997 the proportion of
the
shares held by the institutional shareholders, with
more than 1 million shares, thus decreased margin-
ally from 46,3 % to 44,9 %. More importantly,
there was a dramatic change in the composition of
institutional shareholders. United Kingdom institu-
tional shareholders thus decreased from 30,6 % to
17,5 % whereas United States institutional share-
holders increased from 5,4 % to 15,3 % of the

(1) In 1993, 43 % of the shares were represented. This was down
to 37,4 % in 1994 and to 38,3 % in 1995. It increased to
62,9 % in the contentious 1995 meeting, but decreased to
48,9 % in the EGM on the Gencor/Lonrho platinum merger
in 1995. At the 1996 AGM it was 51,5 % and at the 1996
EGM on disposal of
it was up to
54,9 %. There is no clear trend.

the Metropole Hotels

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Official Journal of the European Communities

L 149/27

shares. The volatility of past institutional share-
holdings would have to be taken into consideration
by the board of Lonrho, whenever the board sought
shareholder support. In these circumstances it is
clear that the shareholder structure indicates that
the board, de facto, would have to rely on the
support of AAC. In other words AAC would be an
element of stability in the shareholder structure,
and thereby a guarantee for a certain strategy and
direction of the company.

(38)

In consequence of the above and consistent with
be
previous Commission
concluded that AAC has acquired the possibility to
exercise decisive influence, and therefore control,
over Lonrho. This conclusion is reinforced by the
following three factors:

decisions,

can

it

(cid:190) the position of other large shareholders in
Lonrho: the next largest shareholder in Lonrho
is SA Mutual with 3,0 % of the shares. As far as
SA Mutual is concerned it has to be noted that
this company has shareholdings of 8,9 % in
AAC, 9,4 % in DBCM and 8,5 % in Anglo
American Platinum Corporation Limited and
its subsidiaries (‘Amplats'). Therefore, it would
not be expected to vote against the interests of
AAC.

AAC argues in the Response (page 24, para-
graph 71, that ‘this assertion is wholly unsup-
ported and without foundation' and that ‘The
board of directors of SA Mutual will vote in the
interest of its members who are policyholders
and the mutual society as a whole and not how
AAC would want or expect it to.' The Commis-
sion considers that the point is not whether SA
Mutual would vote as AAC wants, but whether
SA Mutual would have a commercial interest in
supporting AAC. This is indeed the case, since
supporting the commercial policy of AAC in
Lonrho will be of benefit to SA Mutual as a
shareholder in AAC, DBCM and Amplats.

Therefore SA Mutual’s shareholdings in AAC,
DBCM and Amplats create a commonality of
commercial
interest between AAC and SA
Mutual as far as their interests in Lonrho are
concerned. Consequently, the shareholding of
SA Mutual makes it even less likely that AAC
would be outvoted at future shareholders’ meet-
ings,

(cid:190) industrial leadership: AAC is the only indus-
trial or mining company having a significant
shareholding in Lonrho.

AAC has argued (Response, page 4, paragraph
71) that ‘This is not a relevant factor. The only
opportunity for AAC to exercise its influence is
either through its shareholding or through its
representation on the board.'

In the view of the Commission, AAC can, from
a formal point of view, influence Lonrho either
through its shareholding or through its board
representation. As
the
Commission considers the possibility to exer-
cise decisive influence through a shareholding
in itself sufficient to confer decisive influence.

discussed

above,

However, the fact that AAC is the only indus-
trial or mining company having a significant
shareholding in Lonrho adds to the leverage of
AAC in Lonrho because it increases the influ-
ence of AAC over the board. By nominating
key persons like Mr T. C. A. Wadeson,
the
Technical Director of AAC, to the board of
Lonrho, AAC will be in a strong position to
influence the strategy and direction of Lonrho.
This is in particular the case for the mining
assets. None of the institutional shareholders
would be in such a position. Rather it is to be
expected that
shareholders
the institutional
would be supportive of proposals from the
board produced with the support of highly
qualified AAC directors on the board of
Lonrho. In other words, AAC will not even
need to nominate the majority of the board of
directors in order to have a strong influence on
board decisions, simply because it is the only
major industrial and mining company.

minority

Furthermore AAC has argued that ‘the board
must act at all times in the best interest of the
company and the shareholders as a whole as a
matter of law irrespective of the pressure of
shareholders, . . . '
significant
(Response, page 13, paragraph 33). However,
the question is not whether the board will or
will not fulfil its legal obligations, but rather
whether the AAC presence on the board of
in an anti-competitive
Lonrho will
market outcome,
from a competition policy
view. In this respect it has to be noted that it
can be expected that,
in general, an anti-
competitive outcome could even be beneficial
to
to Lonrho
consumers). Therefore, if AAC were to use its
influence over the board, it would certainly not
necessarily imply that the directors of the board
would be in breach of their legal obligations,

(but harmful

shareholders

result

(cid:190) directors’ holdings: Lonrho’s directors, who
hold a total of 0,12 % of the shares in the
company, would not be expected to vote against
AAC in its capacity of main shareholder. AAC
has argued that ‘This is plainly wrong. Each
Lonrho director who owns
in the
in his own
company will vote his
personal interest but having regard to his posi-
tion and responsibility as a director.' (Response,
page 25, paragraph 71).

shares

shares

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20. 5. 98

At the hearing in the case on 26 February 1997
it was said by Lonrho that the board of Lonrho
reaches its decisions by consensus. In this situ-
ation Lonrho’s directors can only be expected
to vote their shares as recommended by the
board. Moreover, in reaching a decision which
could bring the board into conflict with AAC
each director would have to consider his own
position in particular vis-a-vis AAC. In these
are not
circumstances Lonrho’s
expected to vote against AAC in its capacity of
main shareholder.

directors

(39)

In conclusion, the votes cast by AAC at the general
meetings of the shareholders of Lonrho will secure
AAC the possibility to exercise decisive influence
over Lonrho. In addition,
the three additional
factors above will reinforce AAC’s control over
Lonrho.

B. Decisive influence in the London context

(41)

(40) AAC has argued in the Response that the Commis-
sion cannot rely on its policy in the notice on the
notion of a concentration to alter the fundamental
notion of a concentration as defined in Article 3(3)
of the Merger Regulation. AAC therefore submits
that
the question of whether decisive influence
exists must be examined in the proper factual
economic and legal context (Response, page 12,
paragraph 29). For this purpose AAC examines
what the company calls ‘the London context' by
which is meant the legal framework within which
UK listed companies are regulated. Specifically,
AAC examines the notion of control under the UK
Takeover Code, the position of the board of dir-
ectors and the role of shareholders of a listed
company and the influence of board recommenda-
tions on shareholders:

(cid:190) notion of control under the UK Takeover Code:
the UK Takeover Code provides that if a share-
holder has acquired more than 30 % of the
shares in a listed company, it is obliged to make
a general bid for the company. This threshold
has not been met in the current operation and
therefore, according to AAC, a takeover has not
taken place.

This argument cannot be accepted since the
30 % threshold is not the relevant test for the
purpose of assessing control under the Merger
Regulation nor is it necessary for a shareholder
to make a general bid for a company in order to
the
acquire control within the meaning of

Merger Regulation. The 30 % threshold of the
UK Takeover Code is therefore not considered
further,

(cid:190) the board: according to AAC, in the London
context, it is the responsibility of the board of a
listed company to determine the strategy, direc-
tion and management of the company,

(cid:190) the shareholders: according to AAC, the share-
holders only have a limited role in determining
the strategy and setting the direction of a
company. Generally shareholders only meet
once a year and the purpose of the meeting is
to deal with routine matters such as the receipt
and approval of the annual report and accounts,
election of directors, etc.

(cid:190) influence of board recommendations:

finally,
in the London context
according to AAC,
shareholders are strongly influenced by a board
recommendation with regard to any proposal,
and it is highly unusual for a proposal which
has the support of the board not to be approved
by shareholders.

the board of
The Commission recognises that
Lonrho has in the past played a crucial role in
determining, the strategy and setting the direction
of the company. The role of the shareholders has
been confined to the general meetings of share-
holders. In such meetings, board recommendations
have always been followed by shareholders. As
discussed above this was for example the case in
the contentious resolution in 1995 to appoint Mr
R. W. Rowland President of Lonrho. However, in
recent years the largest shareholders, either Mr
R. W. Rowland or Mr D. Bock, have been on the
board of Lonrho themselves and in addition have
been acting as chief executive. In other words,
recommendations from the board of Lonrho were
tantamount to recommendations from the main
shareholder. It is, therefore, equally valid to say that
in the past Lonrho shareholders have always
followed the main shareholder.

C. Influence over Lonrho Platinum Division

(‘LPD')

(42) AAC has argued that its stake in Lonrho vill confer
on it ‘little influence on LPD through either its
board representation or level of shareholding [in
Lonrho]'. AAC bases this argument mainly on the
fact that, in its view, the LPD board operates inde-
pendently of Lonrho. Moreover AAC has stressed
that it has no plans in relation to LPD.

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L 149/29

(43) While recognising that Lonrho’s investment port-
folio contains other assets of interest to AAC (e.g.
gold and coal), the Commission finds it difficult to
accept that AAC would have no interest in co-
ordinating the business of LPD with its own
platinum business. However, even on the assump-
tion that AAC does not currently have any plans in
relation to LPD, this would in any case not be
relevant for this assessment. What is relevant is that
Lonrho has a 73 % stake in LPD, and therefore
control over it within the meaning of Article 3 of
the Merger Regulation, and that the acquisition by
AAC, DBCM and CHIL of 24,13 % of the share
capital of Lonrho confers on AAC the structural
possibility of exercising decisive influence over
LPD.

Industrial Corporation, Anglo American Properties
and Elandsrand Gold Mining Company), over
which it has control within the meaning of Article
3 of the Merger Regulation, and whose world-wide
exceeds ECU 5 billion and whose
turnover
Community turnover is in excess of ECU 250
million.

(47)

(48)

Lonrho’s annual accounts, for the year ended 30
September 1995, disclose a worldwide turnover of
ECU 2,6 billion and sales in the UK and Europe of
ECU 1,4 billion.

In view of the above figures, and as both AAC and
Lonrho do not achieve more than two thirds of
their sales in one and the same Member State, it
has been concluded that
the operation has a
Community dimension.

D. Conclusion

V. RELEVANT MARKETS

(44)

(45)

Therefore,
it is clear that AAC would have the
possibility to exercise decisive influence over
Lonrho. Firstly, as discussed above, AAC is by far
the largest shareholder with a holding of 27,47 %
of the shares and is expected to cast more than
50 % of the votes at general meetings of the share-
holders. Furthermore, it is not to be expected that
SA Mutual would vote its 3,0 % shareholding
against the interests of AAC which reinforces the
position of AAC. Finally, the two additional factors
mentioned above add to the leverage of AAC in
Lonrho and therefore reinforce the possibility of
AAC to exercise decisive influence over the board
of Lonrho.

In conclusion, the Commission recognises the legal
framework within which control over a UK listed
company is exercised. However, in the view of the
Commission, its analysis as discussed above in the
section ‘Sole control by a “qualified minority”
shareholder'
framework.
fully reflects this legal
Consequently, the operation amounts to a concen-
tration in the sense of Article 3 of the Merger
Regulation.

IV. COMMUNITY DIMENSION

(46) AAC is essentially an investment holding company
and derives the bulk of
its income from these
investments. Therefore it does not itself have a
turnover nor does it retain records that would
produce such data. Despite this fact AAC has iden-
tified certain companies in the notification (Anglo
American Coal Corporation, Anglo American

A. Relevant product markets

A.1. Platinum group metals

(49) AAC has identified four areas of overlap between
its operational activities and those of Lonrho being
sugar and platinum group metals
coal, gold,
(‘PGMs'). As for the aspects of
the transaction
concerning coal, the Commission is satisfied that
the Merger Regulation does not apply and that this
sector should be assessed, as far as is appropriate, in
accordance with Article 66 of the ECSC Treaty.
Similarly the Commission is satisfied that the over-
laps in the production of gold and sugar do not
give rise to affected markets, as defined in the
Annex to the Commission Regulation (EC) No
3384/94 of 21 December 1994 on the notifications,
time limits and hearings provided for in Council
Regulation (EEC) No 4064/89 on the control of
concentration between undertakings (1). Con-
sequently, they are not considered further below.

(50) AAC has identified the affected markets in this
case as being the production of PGMs either from
primary or
reprocessed sources. The ore body
containing PGMs is found principally in South
Africa and Russia; reprocessed PGMs are recovered
from spent autocatalysts and there is no technical
or physical differences between the metals which
are obtained from either of
these sources. The
Commission has
already discussed the PGM
markets in detail in its earlier decision in Case No
IV/M.619 (cid:190) Gencor/Lonrho (2).

(51)

There are six different PGMs: platinum, palladium,
rhodium, iridium, osmium and ruthenium. They
are employed in a wide range of applications,
including:

(1) OJ L 377, 31. 12. 1994, p. 1.
(2) OJ L 11, 14. 1. 1997, p. 30.

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20. 5. 98

(cid:190) jewellery,
(cid:190) catalytic converters for automobiles,
(cid:190) general industrial catalytic applications,
(cid:190) electronic equipment and components,
(cid:190) dental, and,
(cid:190) investment.

(52)

Total worldwide sales of PGMs amounted to about
ECU 2,4 billion in 1995. Platinum is the most
important (64 % of sales) and most widely used of
the PGMs (hence, the origin of the group’s name).
Palladium and rhodium are ranked as the second
and third most important PGMs with 29 % and

6 % of sales, respectively. The remaining three
PGMs (iridium, osmium and ruthenium) are of
lesser commercial
importance and together they
account for less than 1 % of the total sales of
PGMs. They are commonly used in alloys with
platinum or palladium. In addition, they each have
a small number of specialised applications, where
their use is preferred because of their particular
physical or chemical characteristics.

(53)

The following table (1)
in terms of volume (in
thousands of troy ounces) shows the main uses in
1996 for the three most important PGMs.

Autocatalyst

Industrial

Jewellery

Investment

Electrical

Dental

Other

Platinum

Palladium

Rhodium

1 820 (37 %)

2 270 (36 %)

405 (87 %)

1 065 (21 %)

1 840 (37 %)

235 (5 %)

61 (13 %)

1 310 (21 %)

2 120 (34 %)

545 (9 %)

Total western demand

4 960 (100 %)

6 245 (100 %)

466 (100 %)

Note: In addition some 180 000 ounces of platinum were sold by the West to China.

(54)

In Case IV/M.619 (cid:190) Gencor/Lonrho the Commis-
sion concluded that platinum, palladium, rhodium,
iridium, osmium and ruthenium each constituted a
separate relevant product market. As explained
below, this conclusion is maintained in the present
case.

A.2. Platinum

(i) M a i n u s e s o f p l a t i n u m

(55) As shown in the table above the main applications
of platinum are in autocatalysts (37 %), industry
(21 %) and jewellery (37 %), while the residual
amount is sold for investment purposes. The substi-
tution of platinum with other metals is limited for
all these purposes.

(56) Autocatalysts

based on platinum, palladium and/or rhodium have
been developed to eliminate the three most
dangerous gases emitted by motor vehicle engine
exhausts, namely, carbon monoxide (CO), nitrous
oxides (NOx) and unburned hydrocarbons (HC).
The function of autocatalysts is to convert these
noxious gases to less harmful components (carbon
dioxide, nitrogen and water).

(57)

(58)

Platinum is the most active of the thre metals in
CO and HC conversion, it is the least affected by
lead and sulphur in the fuel and works well at low
temperatures. However, it does not reduce NOx
efficiently (a task that rhodium performs well).
Palladium has some ability to convert CO and HC,
and to reduce NOx, but is easily contaminated and
is slow to become operational. Therefore, platinum,
palladium and rhodium perform differently in the
catalytic conversion required by autocatalysts to
remove the noxious constituents.

the achievement of

Platinum, palladium and rhodium are used in
varying ratios and combinations in autocatalysts.
The main driver behind the choice of the metals
and their loading ratios is not the cost of the PGMs,
but
the necessary catalytic
performance to meet specific legislative require-
ments. Such loadings also vary according to factors
such as the engine size, the fuel used (petrol or
diesel), efficiency levels sought, the vehicle mass
and the manufacturers’ design and technology.
Autocatalysts comprising, for example, platinum/
palladium/rhodium or platinum/rhodium or even
palladium alone exist on the market and platinum,
palladium and rhodium can, to a limited extent

(1) Johnson Matthey Platinum 1996 Interim Review.

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Official Journal of the European Communities

L 149/31

(59)

(60)

to

their

only, substitute for each other in an autocatalyst.
Owing
properties
platinum, palladium and rhodium are most
frequently used together in the formulation of an
autocatalyst.

complementary

are

the

costly,

considering

substitution

such changes

In
possibilities
between PGMs in the composition of autocatalysts
account has to be taken of the fact that changes are
slow and often require lead times of several years.
Moreover
requiring
substantial R & D and testing to ascertain whether
the new catalyst would meet ever-tightenirig envir-
onmental regulations. Clearly, therefore, switching
costs for automobile manufacturers go well beyond
the various PGMs involved. This
the costs of
further constrains
for
the limited possibilities
substitution among PGMs in autocatalytic applica-
tions. Finally, it also has to be recalled that diesel
engines, with current technology, have to be fitted
with platinum converters.

In the notification, AAC states that a recent trend
has been the replacement of platinum with palla-
dium in certain autocatalysts systems. According to
AAC, this trend is driven by technical performance
rather than price considerations as motor manufac-
turers have responded to ever more stringent emis-
sion standards (notification, page 17). The Commis-
sion’s investigation has confirmed this view. This
trend cannot be taken as evidence that platinum
and palladium are substitutes and therefore part of
the same relevant product market,
since the
replacement of platinum with palladium is a
change in response to a technological development
and not owing to a price change. In other words
the trend is not
for
example, to a 10 % price increase in platinum, but
superior
because
performance for
in
question.

shown
the particular autocatalysts

taking place in response,

palladium has

a

(61)

In conclusion, technological advances may affect
in autocatalysts.
the usage pattern of PGMs
However, there is no substitution between PGMs in
response to price changes. Furthermore, although
the use of palladium has increased in proportion to
platinum, the market demand for platinum will
continue as platinum will remain the most essen-
tial element for use in autocatalysts.

(62)

Industrial applications

Platinum is widely utilised in industrial applica-
tions, for example as a catalyst gauze for manufac-
turing nitric acid for fertilisers, and in the glass
from
industry, which uses
platinum-rhodium alloys for the highly corrosive
operating environments needed in the production
of high quality LCD glass (used in the screens of

equipment made

computers and televisions). There are no substitu-
tion possibilities for platinum in such industrial
applications.

(63)

Jewellery

Platinum is the only PGM which is used for jewel-
lery. It is also the most precious among all the
precious metals and, in particular, platinum jewel-
lery is more expensive than gold jewellery. This is
due to its higher unit costs, its higher purity than
gold in jewellery uses, and because it is harder to
work than gold.

The demand for platinum in jewellery is dom-
inated by the Japanese market. More than 80 % of
jewellery
the world’s demand for platinum for
came from Japanese consumers
in 1995. The
unique characteristics of
the Japanese jewellery
market therefore have a crucial influence on the
demand for platinum and, accordingly, on whether
specifically gold can substitute platinum to any
significant extent. As explained below, gold is not a
substitute platinum in the Japanese jewellery
market.

The reasons for the high level of consumption of
platinum jewellery in Japan are historical. Firstly,
Japanese culture places a high value on purity:
this preference owing to its
platinum satisfies
99,95 % standard of purity and the fact that the
metal has a ‘whitish' appearance. Secondly,
for
many years (until 1973) the import of gold into
Japan was tightly controlled and the tradition for
platinum jewellery therefore developed. Finally, the
strength of the yen in recent years, relative to the
US dollar (in which platinum is always priced), has
supported the Japanese demand for platinum as
well as other precious metals like gold.

The Commission has examined retail market data
in order to assess the current market position of
platinum versus gold in Japan. In 1995, 35,2
million pieces of jewellery made from platinum,
gold or platinum/gold combinations were sold in
Japan. In unit terms, platinum accounted for 23 %
of the pieces sold (but for 57 % of the total value of
sales) and gold for 71 % of the pieces sold (but
36 % of the value). The balance was accounted for
by combination platinum/gold jewellery.

Platinum is mainly used for the production of
more expensive jewellery i.e. that including gem
stones: measured in sales value, in 1995, platinum
jewellery accounted for 63 % of sales of jewellery
with a gem stone. Conversely, gold jewellery,
including a stone, accounted for only 31 % of sales
and platinum/gold
the
remainder.

in combination for

(64)

(65)

(66)

(67)

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20. 5. 98

(68)

(69)

(70)

(71)

(72)

Platinum is the overwhelming first choice for rings
in Japan. In 1995, 98 % of all engagement rings,
74 % of all wedding rings and 66 % of other rings
were made of platinum. Thus, only 2 % of engage-
ment rings were made of either gold or a platinum/
gold combination; similarly 19 % of wedding rings
were of platinum/gold and only 5 % of gold alone.
The superior popularity of platinum over gold and
platinum/gold
has
remained fairly steady in recent years owing to the
unique characteristics influencing jewellery buying
patterns in Japan. In contrast, platinum is used less
for other types of jewellery. Measured in sales value,
platinum accounted for 47 % of pendants, 37 % of
necklaces, and 25 % of earrings sold in Japan in
1995.

combinations

rings

for

Therefore, gold and platinum do not appear to be
substitutes for jewellery purposes, since their usage
jewellery uses, are quite
patterns
different.

in terms of

The substantial difference in the price levels of
gold and platinum jewellery on the Japanese
market could also be an indicator that gold and
platinum in jewellery are not to any large extent
substitutes
im-
portantly, a price elasticity estimate of Japanese
demand for platinum in jewellery confirmed that
platinum is not subject to strong competition from
other metals.

jewellery purposes. More

for

This estimate of the price elasticity of Japanese
demand for platinum in jewellery required an
econometric estimate. In a study, covering the
period 1975-95, commissioned by the Commission,
on the factors influencing the price of platinum
(see below (ii)), the price elasticity for Japanese
demand for platinum in jewellery was estimated to
be –0,6,
inelastic (numerically smaller than
1) (1).

i.e.

Price inelasticity implies low substitutability. In
view of the above data, it can be concluded that
demand for platinum in jewellery is therefore not
subject to strong competition from other precious
metals on the Japanese market. As seen from the
above discussion this is entirely consistent with the
market position of platinum versus gold on the
Japanese jewellery market.

(73)

Investment demand

Platinum is sold to individuals and companies
(principally in Japan) to hold, for example in the
form of platinum bars, and such investment
demand can be speculative. However, platinum
does not have a position similar to gold which
historically has been used as a means of payment.
Therefore,
for platinum
reflects the underlying uses of platinum for auto-

investment

demand

(1) This means that if the price, for example, increases by 10 %
then quantity demanded will decrease by less than 10 %. The
total sales revenue therefore increases in this situation, despite
a decrease in quantity sold.

catalysts, industrial purposes and jewellery, since it
is these uses which give platinum its value. In
addition there is no evidence to indicate that accu-
mulated stocks of such bars and coins re-enter the
market for platinum. This is demonstrated in the
Johnson Matthey ‘Platinum 1995 Interim Review'
and ‘Platinum 1996 Interim Review' that shows a
reversal in investment demand in only one year
(1986) and then for only one type of bar.

(74)

Conclusion

There are in reality no substitutes for platinum for
its main applications being autocatalysts, industrial
processes and in jewellery. This conclusion is
confirmed by an analysis of the factors which influ-
ence the price of platinum.

(ii) F a c t o r s
p r i c e

i n f l u e n c i n g t h e p l a t i n u m

(75)

The Commission considers that it is the funda-
mental underlying supply and demand require-
ments for platinum in jewellery, autocatalysts and
industrial purposes which have a critical impact on
the price of platinum. It is principally these funda-
mentals, and not other factors like speculation, that
drive the price of the metal over time.

(76)

Observations from ‘Metals Analysis Outlook'

In order to establish the fundamental supply and
demand factors on prices, the Commission tracked
the most important factors affecting prices in the
period 1990-95 by looking at extracts from the
journal ‘Metals Analysis Outlook', which forecasts
the development of the market, quarter by quarter.
According to these documents it was found that the
most important factors are:

(cid:190) forecasts

in the South African production,

expansion or suspension of shafts,

(cid:190) the level of recycled platinum,
(cid:190) the level of Almaz’s sales for the Russian State,
forecast from nickel production and levels of
stockpiles,

(cid:190) the off-take for autocatalyst and car demand,
(cid:190) jewellery demand in Japan, economic condi-
in that country and the yen/dollar

tions
exchange rate, and,

(cid:190) pipeline stocks (stock in process).

(77)

The factors enumerated above show that the price
of platinum is driven by fundamental supply and
demand factors for platinum.

(78)

Commission study on factors affecting platinum
price movements

The purpose of the Commission’s study was to
determine, if possible, the most important factors
driving platinum prices. The main conclusions of
the study are that:

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Official Journal of the European Communities

L 149/33

(a)

the platinum price is statistically correlated
with the gold price on a short-term basis, if not
necessarily a long term basis (the relationship is
shown in paragraph 80 below to be spurious),
but platinum prices are also driven by the
fundamentals of supply and demand within the
platinum industry;

(b) it is not possible to determine any significant
relationship between platinum prices and the
major macro-economic indicators, nor between
gold prices and the major macro-economic
indicators (inflation,
rates, exchange
interest
rates and economic growth);

(c) the platinum futures market

is primarily a
forward market and does not normally have a
high level of speculator activity. In the long-
term, fundamentals will therefore prevail as the
decisive price determining factor;

(d) demand for platinum is price inelastic (see

section (iii) below);

(e) whilst the platinum market is smaller and more
volatile than gold, there is no evidence of exces-
sive speculator activity. Unlike gold there are at
most limited stocks of platinum to satisfy peri-
odic spikes in investment demand.

atic equilibrium (or long-run) relationship between
two or more time-series of data. The results of the
analysis show that the data do not suggest any
equilibrium (or long-run) relationship between the
respective price levels of platinum, rhodium, palla-
dium, gold and silver, nor of any subset of these
metals. This econometric analysis of metal prices
indicates that platinum, rhodium, palladium, gold
and silver prices tend to vary, over the long run,
independently of each other, thus confirming the
view that platinum, rhodium, palladium, silver and
gold are separate relevant product markets.

(82)

Conclusion

An analysis of
factors influencing the price of
platinum indicates that the platinum price over
time is driven by the fundamental supply and
demand factors for platinum, such as the demand
for uses in autocatalysts, industrial processes and
jewellery. The platinum price may be influenced by
short-term speculative movements
in precious
metals like gold, but the platinum price is not
driven by the prices of other precious metals seen
over a longer period of time.

(79)

In conclusion therefore the platinum market is not
a highly speculative market and fundamental
supply-demand factors
the
platinum price.

important

are

for

(iii) D e m a n d
i n e l a s t i c

f o r p l a t i n u m i s p r i c e -

(80)

Price correlations between platinum, gold, silver,
rhodium and palladium, are spurious

(83)

Although the prices of precious metals like gold
and platinum are highly correlated, a high correla-
tion does not in itself imply a causal relationship.
Indeed economic price series data are often non-
stationary (i.e. trended) and therefore automatically
correlated. The Commission has therefore under-
taken a more elaborate analysis of the correlation
between the prices of platinum, gold,
silver,
rhodium and palladium.

(81)

The Commission undertook a
co-integration
analysis of the data set of the prices of platinum,
rhodium and palladium, as well as gold and silver
prices. Co-integration analysis is an econometric
method which can test whether there is a system-

The portion of platinum demand accounted for by
is price-
industrial processes and autocatalysts
inelastic, probably with a price elasticity close to
zero, since there is basically no appreciable substi-
tution for platinum for these purposes if the price
was to increase by a small but significant amount.
The price elasticity for jewellery demand on the
Japanese market was found, in the abovementioned
study, to be price-inelastic with an elasticity of
– 0,6. Since autocatalysts and industrial processes
accounted for about 55 % of the market, and the
Japanese jewellery market for about 30 % in 1995,
this means that the price-elasticity of 85 % of the
global platinum market
is highly inelastic. The
remaining 15% of demand is for jewellery outside
Japan (5 %) and investment (10 %). The jewellery
market outside Japan is likely to have a limited
price elasticity of demand, since platinum jewellery
Further-
is

‘up-market'

product.

special,

a

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Official Journal of the European Communities

20. 5. 98

more, the effect of investment demand, on overall
price elasticity is limited. All in all, it can therefore
be concluded that the price elasticity for the total
market is inelastic (numerically smaller than 1).

(88)

(84) A price elasticity numerically smaller

than 1
implies that the cross-price substitution elasticities
to other metals are even smaller, i.e. the compet-
itive impact of other metals is not very high. There-
fore, price inelasticity of demand indicates that
platinum is a separate relevant product market.

Palladium is widely used in autocatalysts and
industrial catalysts in the petroleum refining and
chemical industries, for example being employed
to reduce losses of platinum and rhodium during
the conversion of ammonia to nitric acid. Palla-
dium is also an important strategic raw material in
electronic components, in particular in palladium-
containing components known as multi-layer
ceramic capacitors (MLCC). These components are
widely used in electronics and telecommunications
equipment. For example, a single mobile phone
contains around one hundred MLCC.

(85)

(86)

that

substantial

The demand for platinum is obviously only price-
inelastic in the current price range. This means
that, for example, a 10 % shift in the price level
would be possible without any significant substitu-
tion starting to take place. However, the Commis-
sion recognises
substitution of
platinum by other metals could not be excluded,
subject to certain lead times, if there were to be, for
example, a 100 % or even greater increase in price.
Such a phenomenon was witnessed in the case of
rhodium, when the price for rhodium increased
from USD 300 to USD 7 000 per ounce at the
beginning of the 1990s. With a price increase of
more than 2 000 %, buyers of rhodium started
development work with the aim of finding substi-
tutes. The result was that many uses of rhodium
disappeared. However, extreme price increases like
this are not the appropriate test for the purposes of
defining relevant product markets.

(iv) C o n c l u s i o n

systems,

In the notification AAC has stated that a recent
trend has been the substitution of platinum by
palladium in certain autocatalyst
that
platinum is substitutable by other precious metals
in jewellery applications, and that for investment
purposes it competes with all other forms of invest-
ment. The Commission recognises these elements.
However, based on the above analysis the Commis-
sion concludes that overall these elements are not
strong enough to consider, for example, platinum,
gold and palladium to be part of the same relevant
product market. Rather, the Commission maintains
its conclusion from Case IV/M.619 – Gencor/
Lonrho that platinum is a separate relevant product
relevant product
market, which is a different
market from those of gold and palladium.

A.3. Palladium

(87)

Palladium is mainly used for industrial purposes.
Only 4 % (200 000 oz) of yearly palladium demand
is for use in jewellery as an alloy with platinum or
as a non-allergenic whitening agent
for gold.
Specifically, palladium is not a substitute for
platinum in jewellery.

(89)

Palladium is found in the same ore body as
platinum and is produced, albeit with a different
refining process, by the same companies
as
platinum.

(90) As discussed above under platinum, the palladium
the
price varies independently of
other PGMs as well as gold and silver prices
(section V.A.2(ii)). Therefore, the Commission has
come to the conclusion that palladium constitutes
a separate relevant product market.

the prices of

(91)

(92)

(93)

(94)

A.4. Rhodium

Rhodium is mainly used for automotive purposes.
Rhodium is
found in the same ore body as
platinum and is produced, albeit with a different
refining process, by the same companies
as
platinum. As discussed above under platinum, the
rhodium price varies independently of the prices of
the other PGMs as well as gold and silver prices
(section V.A.2(ii)). There are no substitutes (section
V.A.2(i)). For this reason, the price elasticity is close
to zero in the current price range. Therefore, the
Commission has come to the conclusion that
rhodium constitutes a separate relevant product
market.

A.5. Ruthenium, iridium and osmium

The remaining three PGMs (iridium, osmium, and
ruthenium) are of lesser commercial
importance
and are commonly used in alloys with platinum or
palladium.

There are no substitutes for these metals, and based
on public data on prices, their prices appear to
develop independently of other metals. Therefore,
they each appear to be separate relevant product
markets.

B. Relevant geographic market

PGMs are fungible materials, are easily transported,
are refined to the same purity standards throughout
tariff
the world and are readily traded without
barriers. In Case IV/M.619 – Gencor/Lonrho, the
markets for PGMs were found to be global. This
conclusion is maintained in the present case.

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Official Journal of the European Communities

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(95)

(96)

(97)

(98)

B.1. Platinum and palladium

Platinum and palladium are sold on a worldwide
basis either under long-term contracts or on the
metal markets. Prices of platinum and palladium
bought under long-term contracts are linked to a
market price index and are generally fixed on a
monthly basis on the average of the daily ‘fixes' of
to the
the exchanges during the month prior
month of delivery. Prices are expressed in US
dollars per troy ounce gross.

quoted prices expressed in US dollars per troy
ounce. Therefore, owing to the worldwide trading
and market price determination of
rhodium,
iridium, osmium and ruthenium the relevant
geographic markets for these metals are worldwide.
According to the notification AAC agrees that the
rhodium market is a truly global market, whereas
their data on iridium, osmium and ruthenium are
insufficient to answer this question.

(LPPM),

specification

The principal metal exchanges for platinum and
palladium are the London Platinum and Palladium
Market
the New York Mercantile
Exchange (NYMEX) and the Tokyo Commodity
Exchange for Industry (TOCOM). There are well-
both
defined
platinum and palladium determining the form,
weight, purity and markings to which each metal
must conform in order to be traded on the metal
exchanges. Producers have to be recognised as
‘Good delivery' producers or manufacturers before
their material is accepted for trading on the market.
There are a number of producers who have been
recognised under this agreement.

requirements

for

The LPPM market is the only spot market of the
three, while NYMEX and TOCOM are both futures
markets of which NYMEX is the most important.
However, these metal exchanges function as part of
the same integrated world market for platinum and
palladium. Traders regularly act in all three market
places simultaneously, for example by trading on
the LPPM spot market for physical delivery and
hedging positions on the futures market in New
York.

The metal exchanges are in reality interlinked.
There is, therefore, a worldwide geographic market
with a world market price expressed in US dollars
per troy ounce for both platinum and palladium.
According to the notification AAC agrees that the
for platinum and palladium are truly
markets
global. AAC has provided data on its deliveries into
Europe, but recognise that owing to the fungible
nature of PGMs it cannot be assumed that metal
delivered to Europe is actually used or consumed
there. Conversely metal delivered elsewhere may be
used in Europe.

VI. COMPATIBILITY WITH THE COMMON

MARKET AND THE EEA AGREEMENT

(100)

It is the Commission’s conclusion that the opera-
tion will create dominant positions in the platinum
and rhodium markets. As regards palladium,
it
appears that the Russian producer is dominant and
that the current operation does not affect this posi-
tion. Furthermore neither a creation nor a strength-
ening of a dominant position occurs in the markets
for iridium and ruthenium. As for osmium, there is
no overlap between the parties, since Lonrho does
not produce this metal. Consequently only the
platinum and rhodium markets are assessed further
below.

A. Sources of PGMs

Proven and probable reserves and existing
mines of primary PGMs

(101) PGMs occur naturally together in the same ore
body. They also tend to be concentrated together
with ferrous metals (iron, nickel, copper, chromium
and cobalt) as a result of geological processes. The
proportions in which the metals are found in the
ore bodies vary across different geographic regions.
For instance, in South Africa the PGM ores are
richer in platinum than in other areas. Conversely,
in Russia the ore body produces predominantly
palladium; explaining why the Russians presently
supply the major part of the world’s palladium.

B.2. Rhodium,
ruthenium

iridium,

osmium and

(99)

The markets
iridium, osmium,
rhodium,
ruthenium are less well developed. However, these
metals are traded on a global basis at publicly

for

(102) PGMs are basically mined in two areas: the Bush-
veld Complex in South Africa and at the Noril’sk
deposit in northern Siberia. The Bushveld Complex
in South Africa is the only major area where
deposits are being mined for their PGM contents
alone. At the Noril’sk deposit in northern Siberia,

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Official Journal of the European Communities

20. 5. 98

in several countries, but

PGMs are mined as a by-product of nickel. Minor
PGM deposits exist
in
most cases it is not economically viable to mine the
ore. The most
important deposits being mined
outside the Bushveld Complex and Noril’sk are
found in eastern Siberia, in the United States (Still-
water) and in Canada (Inco). According to official
reserve figures from the European Minerals Year-
book the Bushveld Complex accounts for 89 % of
the world’s reserves of PGMs and Russia for about
10 %, as a by-product to the mining of nickel.

New mining projects

(103) Only the Hartley mine in Zimbabwe, which is
owned by the Australian companies BHP and
Delta Gold, is likely to be a new source of PGMs.
However, this mine will only be an insignificant
actor in terms of volume on the PGMs markets.

Recycling of PGMs

(104) Recycling is only expected to have a limited impact
on the platinum market within the foreseeable
future. Recycling takes two forms:

(a) in closed circuits: where PGMs are used in
industrial catalysts and where the metals need
to be refurbished after a certain period of opera-
tion. The metal is toll-refined and accordingly
its ownership does not change because of recyc-
ling. Losses occur to a small extent (some 2 %)
in the process. The recycled metals never enters
the market. An impact on the market only
these small
comes from the replacement of
losses;

(b) recycling from scrap: autocatalysts are by far the
most important source of PGM scrap. Johnson
following
estimated that
Matthey has
volumes (in troy ounces) were recovered in
recent years from this source.

the

1994

1995

1996

Platinum

310 000

335 000

370 000

Palladium

105 000

115 000

135 000

Rhodium

36 000

39 000

47 000

The 1996 recoveries represent, respectively, some
8 %, 2 % and 10 % of the total platinum, palla-
dium and rhodium supplies in that year.

The volumes of PGMs recovered have increased
over the last 20 years but the absolute share of the
total supply of PGMs has remained low. This is
despite the enactment of legislation for the protec-
tion of the environment in various countries. Even

from autocatalysts

in 1996, the volume of platinum, palladium and
rhodium recovered
only
amounted, on average, to some 13 % of gross auto-
catalyst PGM consumption. This ratio was some
20 % in both Japan and North America: areas
where legislation for the protection of the environ-
ment has been in place longer.

There are several reasons for these low levels of
recovery: used cars are not necessarily scrapped but
often exported (to Africa and Eastern Europe from
the EEA, to Mexico from the USA) – exports have,
it is estimated, reduced spent autocatalyst avail-
ability, in Europe, by 50 %; scrap yards do not
remove autocatalysts and cars, including their cata-
lysts, are lasting longer than originally forecast.
Moreover the recovery process is long and costly.
Long because it may take many months from the
collection of the autocatalyst from a scrap yard to
its conversion into PGMs; costly because collection
systems have to be established and capital invest-
incurred in smelting and precious metal
ment
refining capacities. Consequently,
the financial
benefits to recyclers are limited and, given that a
primary producer is processing spent autocatalysts,
thereby driving up their price, it is questionable as
to how long independent recyclers will continue to
operate.

is estimated by
Notwithstanding these facts it
industry sources that,
in the long run, recycled
PGMs may account for up to two-thirds of gross
autocatalyst demand. Such a level may be achiev-
able given ever tighter environmental
legislation
and producers’ responsibility for accounting for the
whole of their production. In the light of the North
American experience this is unlikely to happen
within the next five years.

Conclusion

(105) On the basis of the above, primary PGMs will
essentially continue to come from known reserves
in South Africa and Russia and recycled autocata-
lyst PGMs will only form a limited supplementary
source of supply. These situations are not expected
to change in the foreseeable future.

B. Platinum

Market position of the parties

(106) AAC controls either directly or indirectly Anglo
American Platinum Corporation Limited and its
related companies being: Rustenburg Platinum
Holdings Limited (‘Rusplats'), Potgietersrust Plat-
inums Limited (‘PP Rust') and Lebowa Platinum
Mines Limited (‘Lebowa'). These four companies
are known, collectively, as Amplats. Specifically

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L 149/37

the
AAC and DBCM hold, directly, 43,6 % of
shares of Anglo American Platinum Corporation
Limited and,
indirectly, some 1,5 %. The other
major shareholders of Anglo American Platinum
Corporation Limited are Standard Bank Nominees
(Tvl) (Pty) Limited and SA Mutual which are also
significant shareholders of AAC and DBCM.

(107) Lonrho holds 73 % of

the shares of Western
Platinum Limited and Eastern Platinum Limited,
which together form LPD. Impala Platinum Hold-
ings Limited (‘Implats') holds the balance. In 1995
the combined market share of Amplats and LPD
was 47 % of primary platinum and 44 % if recov-
eries from recycling is included (see Annexes II
and III).

(108) Furthermore, AAC holds shares in two of the four
main downstream operators in the PGM industry
being Johnson Matthey based in the UK and
Engelhard based in the USA. Both these companies
are fabricators; i.e. they either transform pure PGMs
into other products such as autocatalysts or cata-
lytic gauze or resell or trade the metals, sometimes
in smaller quantities, on behalf of downstream
customers such as the jewellery industry.

Current competition

(109) The current competitors

to Amplats/LPD are
mainly Gencor through its subsidiary Implats and
through the Russian
the Russian government
Ministry of Finance (‘the Russian producer') (1).

(110) Amplats

is

followed by
the leading producer
Implats. However, competition in the platinum
industry has mainly been provided by LPD and the
Russian producer in the past decade. In the period
1985-96 the market thus almost doubled in size
from 2,8 to 5,2 million ounces. Russia increased its
market share from 8 % to about 21 % and LPD
increased its market share from [less than 5 %] to
[between 10 and 15 %]. The market share of
Amplats and Implats decreased accordingly. The
expansion of LPD and the Russian producer has
been the main factor in keeping real prices roughly
at
the
their 1985 level. The development of
platinum price and the movement in market shares
in a
that
competition in the platinum market, in the past
decade, has mainly been provided by LPD and the
Russians.

growing market

indications

are

(111) Russia is currently a major supplier of platinum,
which is mainly produced as a by-product of nickel
in the Noril’sk nickel mine (‘Noril’sk'). However,
the mine is in a poor condition owing to a lack of
investment and huge environmental problems. It is
thus estimated that it could cost more than USD 1
billion to remove the environmental problems. It is
widely accepted that production has fallen since
the late 1980s and that sales have been made from
stocks in recent years and not from production. It
is estimated that some 50 % of Russian sales (some
600 000 ounces p.a. or more than 10 % of annual
supply) are currently coming from stocks (see
‘Platinum 1996', Johnson Matthey). It is believed,
in the industry that the Russians will have to stop
selling from stocks in about one to two years’ time.
The future reduction in Russian sales will lead to a
decrease of the Russian producer as a competitive
force in the platinum market. Only the three South
African producers and in particular Amplats/LPD
will be able to fill the future demand gap left by
the Russian producer.

attempt

(112) New investments are not currently under way at
the Russian
the mine is part of
Noril’sk but
Government’s privatisation programme. According
to Johnson Matthey (‘Platinum 1996') the auction
of shares was won by the Russian bank Unexim-
bank, which effectively acquired the government’s
38 % shareholding (and 51 % of the voting rights)
in 1995. However, Uneximbank’s
to
impose changes in the management met with
strong resistance and was disputed in the Moscow
the same time the
Court of Arbitration. At
company became the subject of an investigation of
the privatisation of State owned companies by a
special committee set up by the State Duma in
which the Communists are the single largest group.
According to Johnson Matthey ‘. . . to maintain
output in the longer term, significant investment is
required to develop replacement ore reserves and
upgrade processing facilities. This is unlikely to be
forthcoming while Noril’sk Nickel’s ownership is
in question.' (Platinum 1996, p. 18). At this stage
the management and ownership issues of Noril’sk
have not yet been settled. In this connection it is
important to note that even if investments were to
be forthcoming within the near future,
then it
would still take several years before there would be
a market impact owing to the long investment lead
times in the mining industry.

(1) Before November 1996 the Russian Government controlled
the sales of PGMs through its Committee for precious metals
and its sales agency, Almaz. As of the end of November 1996
the responsibility was transferred to the Ministry of Finance
(Platinum 1996, Johnson Matthey).

(113)

Implats can only be expected to be a limited source
of competition in the future. According to Implats,
the annual reports of Amplats and Implats, and the
circular to shareholders in the proposed Gencor/
Lonrho merger, Amplats and LPD will together

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20. 5. 98

control the large majority of reserves in the Bush-
veld Complex. More importantly, Amplats/LPD
control almost all low-cost reserves in the Bushveld
Complex, whereas
to
deeper and therefore high-cost reserves, a fact that
has contributed to its declining market share in
recent years (see Annex III). The difference in the
nature of reserves gives Amplats/LPD a strategic
advantage over Implats.

Implats only has access

(114) Stillwater and Inco are marginal producers and
mine platinum as a by-product of palladium and
nickel respectively. The fourth South African mine,
Northam,
is also a marginal producer with a
market share of between [less than 5 %] and [less
than 5 %]. Moreover,
it has very deep reserves
making it a high-cost operator and, accordingly, its
future is in doubt owing to its lack of profitability.

has huge environmental problems and its mine is
in a poor condition and in need of investment.

Potential competition

(118) As discussed above the global high quality ore
reserves of platinum are in the hands of Amplats,
Implats, LPD and Russia. This is a definitive barrier
to entry. The only new mine likely to come on
stream in the near future is the Hartley mine in
Zimbabwe which should become operational by
mid-1997. It is forecast to have the potential to
produce 150 000 oz per year (less than 3 % of
annual world production).

(119) Consequently there will be no significant potential
competition, within the foreseeable future, in the
platinum market.

(115) The AAC and Gencor groups are linked via share-
holdings in Gold Fields of South Africa which
owns the majority of the shares in Northam. The
current operation links AAC and Gencor via the
minority shareholding of Implats in LPD.

(120)

(116) Finally, as discussed above,

recycling is only
expected to have a limited impact on the platinum
market. Furthermore the impact of recycling will
be limited by the competitive structure of the re-
cycling industry. At present in Europe the main
recyclers are Union Mini(cid:138)re and Degussa. However,
primary producers like Implats and the Russian
producer recycle autocatalyst scrap for its contents
of platinum. These producers have a competitive
advantage in comparison to companies like Union
Mini(cid:138)re and Degussa, since recycling is a fringe
activity and therefore can be carried out by these
producers at lower costs. Consequently, the long-
term viability of the recycling activities of com-
panies like Union Mini(cid:138)re and Degussa may be
threatened by the operations of primary producers.

(117)

In conclusion,
the current operation will bring
together Amplats and LPD which are the two
producers having the best reserve prospects in the
industry. When the Russian producer, as expected,
stops selling from stocks it is forecast that the
combined market share of Amplats/LPD is likely
to increase to about [between 55 and 60 %] of the
platinum market. Competition to Amplats/LPD is
likely to come from Implats and the Russian
producer. However, neither of these two producers
are likely to be able to constrain the behaviour of
Amplats/LPD: Implats is at a strategic disadvantage
compared to Amplats/LPD due to the low-cost
reserves of Amplats/LPD. The Russian producer

No countervailing buyer power

Industrial customers account for the greatest part of
platinum purchases; such purchases are normally
acquired under long-term contracts. However, fab-
ricators, and other industrial users, are not the final
customers. It is unlikely that end customers have
any countervailing purchasing power of
signi-
ficance owing to the indispensable nature of the
product and the large number of downstream
customers. Fabricators and other industrial users
can simply pass on price increases to the final
consumers. Finally, any countervailing buyer power
that may exist is diluted by the fact that two of the
biggest fabricators, Johnson Matthey and Engel-
hard, are linked to Amplats.

Conclusion

only

operators with significant

(121) The transaction will create a dominant position for
AAC in the platinum market. The combined
market share of Amplats and LPD is an estimated
[between 40 and 45 %] in 1996. Amplats/LPD are
the
growth
prospects within the foreseeable future due to their
large, low-cost reserves and will therefore hold the
key to the platinum market in the future. The
market share of Amplats/LPD is likely to increase
over the next few years to an estimated [between 55
and 60 %]. Furthermore, it must be recalled that
Implats
linked with both
Amplats and LPD and that AAC holds indirectly
in downstream fabrication and trading
shares
operations
in the industry. Amplats/LPD will
therefore have an overwhelming market position in
the platinum industry which will allow it to act, to
an appreciable extent, independently of its compet-
itors, customers and ultimately its consumers.

and Northam are

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(122) More specifically it

is expected, according to
industry sources, that the Russian producer’s share
of the market will be halved in the next one to two
years and that
total demand for platinum will
continue to grow over the next ten years. This will
leave a supply deficit, which will have to be filled
from new sources or else result in price increases.
In view of the higher cost reserves of Implats it is
unlikely that much of the supply deficit can be
covered from Implats’ mines within the current
price range. Furthermore, additional supplies from
North America, Zimbabwe and recycling will be
limited. Therefore the only major
source of
platinum to cover
the supply deficit will be
Amplats/LPD. Accordingly Amplats/LPD would be
in a position to determine the increase of
the
platinum price due to the price inelasticity of
demand in the current price range and, in this
respect, be able to act, to an appreciable extent,
independently of its competitors, customers and
ultimately its consumers.

remedy within one week of

month period. In this case it should be noted that
AAC had already submitted undertakings within
the three month period, but following their discus-
sion at
the Advisory Committee meeting on 2
April, was prepared to reconsider and offer an
acceptable
that
meeting. This case is exceptional because the
preliminary, draft decision discussed at
the
Advisory Committee was a combined decision
pursuant to Article 8(3) and 8(4) of the Merger
Regulation. The Article 8(4) order therein effect-
ively contained the same terms as the revised
undertaking submitted by AAC. Consequently, as
the concentration has already been implemented,
and in order to avoid any unnecessary harm to
AAC and its related companies, it is considered to
be appropriate to permit AAC greater flexibility by
allowing it to put in place its undertaking on its
terms rather than imposing the same terms by way
of an Article 8(4) order. Both the Member States
and third parties have been allowed a reasonable
time to submit
their comments on the revised
undertakings.

C. Rhodium

(123) As for platinum Amplats/LPD had.a combined
market share in 1996 of [between 45 and 50 %] of
the primary rhodium market and [between 40 and
if recycling is included. The competitive
45 %],
to
the rhodium market
structure of
platinum. For similar reasons as discussed under
the platinum market the current transaction, there-
fore, gives rise to a dominant position for rhodium.

is similar

(126)

In summary the revised undertakings include a
transfer of shares (the ‘trust shares') held by AAC
and DBCM in Lonrho to an independent trustee so
that AAC, DBCM, CHIL and Southern retain
9,99 % of Lonrho’s shares. During a subsequent
period of [ . . . ] from the date of this Decision, the
trust shares can not be voted by AAC or DBCM
except with the prior approval of the Commission.
Furthermore the trustee will abstain from voting
the shares [ . . . ].

VII. UNDERTAKINGS SUBMITTED BY AAC

(127)

(124) AAC has submitted undertakings to resolve the
competition concerns raised by the concentration
both with the notification and subsequently within
the period foreseen by Article 18 of Commission
Regulation (EC) No 3384/94. Neither the under-
takings submitted with the notification nor those
submitted on 26 March 1997 satisfied the Commis-
sion’s concerns. Subsequently, on 9 April 1997,
the undertakings
AAC submitted a revision of
previously supplied. These revised undertakings
were finally formalised on 17 April 1997; this letter
of 17 April 1997 and its integral, attached docu-
the revised under-
ments contain the detail of
takings which are not set out in this Decision.

In addition, AAC and DBCM have undertaken to
dispose of the trust shares so that the aggregate
shareholding of AAC, DBCM, CHIL and Southern
does not exceed 9,99 % by the end of
[ . . . ]
following the date of this Decision. However, if
Lonrho disposes of the entirety of its shareholding
in Eastern Platinum Limited
and Western
Platinum Limited to an independent third party,
which may include Gencor Limited should the
Court of First Instance find against the Commis-
sion in Case T102/96 – Gencor v. Commission,
the undertaking that AAC and DBCM are to
dispose of the trust shares will cease to have effect.

(125)

It is appreciated that the revised undertakings have
been submitted outside the time period foreseen in
Commission Regulation (EC) No 3384/94; however
this Regulation also provides that the Commission
may in exceptional circumstances extend the three-

(128)

If AAC and DBCM have failed to dispose of the
trust shares prior to the expiry of [ . . . ] from the
date of this Decision, AAC will appoint an invest-
ment bank or similar institution to work with AAC
to find a purchaser for the trust shares. The invest-
ment bank will be irrevocably mandated to sell the

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20. 5. 98

trust shares within the [ . . . ] period. Any sales of
the trust shares will be to a party unrelated to AAC.

(129) Finally, AAC has undertaken to procure the resig-
nation of Mr T. C. A. Wadeson, its nominee on the
Lonrho board, who will resign within [ . . . ] of the
this Decision. However, after the trust
date of
the
shares have been transferred to the trustee,
Commission does not object
to AAC putting
forward a candidate for appointment to the Lonrho
board in accordance with the company’s articles of
association.

(130) During the period in which AAC has a nominee
on the Lonrho board and the trust shares are held
by the trustee, AAC and Lonrho have agreed to
ring-fence the activities of
the AAC director
meaning that he would not be party to commer-
cially sensitive information etc. concerning LPD.
The ring-fencing would appertain to Lonrho’s
board of directors, the action of LPD shareholders
and commercial agreements with LPD. The ring-
fencing would be monitored by an independent
trustee who would report thereon to the Commis-
sion.

VIII. ASSESSMENT OF

REVISED UNDER-

TAKINGS

(131) The revised undertakings address the competition
concerns of AAC and Lonrho combining their
operations to form a dominant position in the
markets for platinum and rhodium. The Commis-
sion is satisfied that the reduction in AAC’s share-
holding to 9,99 % removes any possibilty of it
exercising decisive infuence over Lonrho. This will
be achieved by either the divestment of shares held
they
by AAC and DBCM in Lonrho, so that
that
in
financial
become
company, or by the sale of LPD by Lonrho.

investors

passive

1996. Thus at the time of appointment AAC was
interested in the whole block of shares which
would give it the possibility of exercising decisive
influence over Lonrho. On the other hand, given
that AAC and DBCM still remain large share-
holders in Lonrho,
the Commission would not
object if a nominee of AAC were appointed to the
Lonrho board in accordance with Lonrho’s articles
of association.

(134) However,

the Commission also believes that

it
must impose obligations on AAC to ensure the
effective operation of
the revised undertakings.
These obligations concern the method by which
the Commission would permit the trustee to vote
the trust shares and the means to control the iden-
tity of the parties to which the trust shares may be
sold. In order to deal with these matters in a timely
fashion and in order to reduce any hardship to
AAC and DBCM,
the trust
shares are only voted when the Commission
permits and the method for controlling the identity
of purchasers of the trust shares are based on a
procedure of non-opposition by the Commission as
indicated in paragraph 135 below.

the obligation that

(135) Whenever AAC and DBCM wish the trustee to
to provide the
shares, AAC is
vote the trust
Commission with all relevant data appertaining to
the vote together with information [ . . . ]. AAC is to
provide all this information at least [ . . . ] prior to
the date of the vote on the resolution in question.
If the Commission does not, within [ . . . ] of the
submission of the request, object to the trustee
voting the trust shares or require that further in-
formation be submitted, the trustee will be free to
vote the trust shares.

(132) The transfer of the trust shares and the appoint-
ment of an investment banker to oversee and, if
necessary, to effect the sale of the trust shares are
structural
required by the Merger
Regulation.

remedies as

(133) Moreover, the procurement of the resignation of Mr
T. C. A. Wadeson as a director of Lonrho is con-
sistent with the transfer of the trust shares to the
trustee. This is because Mr Wadeson was appointed
when AAC became entitled to acquire shares under
the agreements of 13 and 15 March and 12 April

(136) As regards the identity of a purchaser for the trust
shares, the Commission considers that such a sale
should not be made to a company which has a
the
significant platinum operation. However,
Commission also appreciates that, should the Court
of First Instance of the European Communities
uphold Gencor’s application in Case T102/96 –
Gencor v. Commission, a sale to Gencor may also
be appropriate. Accordingly the choice of a party to
whom any sale of the trust shares can be made, by
either AAC, DBCM, the trustee or an investment
banker must be restricted. Therefore, the purchaser

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Official Journal of the European Communities

L 149/41

(137)

must not be a company or person connected with
either the AAC or Gencor groups of companies
(including but not limited to all their subsidiaries,
parent companies and associated companies) and
members of Oppenheimer family or any company
controlled directly or indirectly by the family. The
Commission must be in a position to assess the
choice of purchaser and evidence of
its inde-
pendence must be produced by AAC to the
the
Commission before the sale is made.
Commission does not; within [ . . . ] of the submis-
sion of
the request, either formally indicate its
disagreement with the choice of the purchaser or
require that further evidence of the independence
of the purchaser be provided, the sale to the chosen
purchaser shall be free to proceed.

If

also be recognised that

It must
should the
combined shareholding of AAC and its related
companies be reduced, excluding trust
shares,
below 9,99 % they should be permitted to transfer,
to themselves, shares which were previously desig-
nated as trust shares. AAC has undertaken that
such a transfer would not occur unless it was
approved by the Commission and that a disposal of
shares, that were previously trust shares, would not
take place unless the disposal was first approved by
the Commission. The Commission would not
object to a transfer of shares that were previously
designated as
shares provided that AAC
demonstrates that the combined holding of the
AAC group of companies
(including but not
limited to all their subsidiaries, parent companies
and associated companies) and members of
the
Oppenheimer family or any company controlled
directly or indirectly by the family will not exceed
9,99 % in Lonrho. If the Commission does not,
the request,
within [ . . . ] of
formally indicate its disagreement with AAC’s
request, the transfer of trust shares to AAC may
proceed.

the submission of

trust

(138) Furthermore AAC has stated that the Commission
must approve the name and the terms of appoint-
ment of an investment bank or similar institution,
within [ . . . ] of the adoption of this Decision, to
work with AAC as regards the sale of the trust
shares. Therefore [ . . . ] prior to the naming and
appointment of
the investment bank or similar
institution AAC is to provide all relevant details to
the Commission has not
the Commission.
objected thereto, within [ . . . ] of having received all
relevant details, the appointment may proceed.

If

IX. CONCLUSION

(139) Consequently the notified operation, as modified
by the revised undertakings submitted on 17 April
1997, will not create or strengthen a dominant
position in the markets for platinum and rhodium
and is, therefore, on the condition that the revised

undertakings are adhered to, compatible with the
common market and the functioning of the EEA
Agreement.

(140) Should any of the commitments entered into by
AAC and DBCM not be followed, the conditions of
this Decision would be breached and the condi-
tional approval by the Commission of the opera-
tion would be void. Similarly should either of the
the
obligations imposed on AAC be breached,
Commission may revoke this Decision pursuant to
Article 8(5) of the Merger Regulation,

HAS ADOPTED THIS DECISION:

Article 1

Subject
to full compliance with the commitments
contained in AAC’s letter of 17 April 1997 vis-a-vis the
Commission and identified in paragraphs 124 to 138
above and the obligations imposed by the Commission in
Articles 2, 3, 4 and 5, the concentration notified by AAC
on 14 November 1996 relating to acquisition of shares in
Lonrho is declared compatible with the common market
and the functioning of the EEA Agreement.

Article 2

Whenever AAC and DBCM wish the trustee to vote the
trust shares, AAC shall provide the Commission with all
relevant data appertaining to the vote together with in-
formation [ . . . ]. AAC shall provide all this information at
least [ . . . ] prior to the date of the vote on the resolution
in question. If the Commission does not, within [ . . . ] of
the submission of the request, object to the trustee voting
the trust shares or require that further information be
provided, the trustee will be free to vote the shares.

Article 3

The party to whom the trust shares may be sold should be
subject to the following restrictions: the purchaser shall
not be a company or person connected with either the
AAC or Gencor (except if the Court of First Instance of
the European Communities upholds Gencor’s application
in Case T 102/96 – Gencor v. Commission) groups of
companies (including but not limited to all their subsidi-
aries, parent companies and associated companies) and
members of the Oppenheimer family or any company
controlled directly or
indirectly by the family. The
Commission must be in a position to assess the choice of
purchaser and evidence of
its independence must be
produced by AAC to the Commission before the sale is
made. If the Commission does not, within [ . . . ] of the
submission of the request, either formally indicate its
disagreement with the choice of the purchaser or require
that
the
purchaser be provided, the sale to the chosen purchaser
may proceed.

the independence of

further evidence of

L 149/42

EN

Official Journal of the European Communities

20. 5. 98

Article 4
In the event that the combined shareholding in Lonrho
of AAC and its related companies is reduced, excluding
trust shares, below 9,99 % they shall be permitted to
to themselves, shares which were previously
transfer,
designated as trust shares. The Commission will not
object to a transfer of shares that were previously desig-
nated as trust shares provided that AAC demonstrates that
the combined holding of the AAC group of companies
(including but not limited to all their subsidiaries, parent
companies and associated companies) and members of
the Oppenheimer family or any company controlled
directly or
indirectly by the family will not exceed
9,99 %. If the Commission does not, within [ . . . ] of the
submission of the request, formally indicate its disagree-
ment with AAC’s request, the transfer of trust shares to
AAC may proceed.

Article 5
Within [ . . . ] of the adoption of this Decision, AAC shall
propose to the Commission the name and terms of
appointment of an investment bank or similar institution

to work with AAC in the sale of the trust shares. If the
Commission has not objected within [ . . . ] of having
received all relevant information, the appointment may
proceed.

Article 6

This Decision is addressed to:

Anglo American Corporation
of South Africa Limited
44 Main Street
Johannesburg
Republic of
South Africa.

De Beers Consolidated
Mines Limited
36 Stockdale Street
Kimberley 8301
Republic of
South Africa.

Done at Brussels, 23 April 1997.

For the Commission

Karel VAN MIERT

Member of the Commission

20. 5. 98

EN

Official Journal of the European Communities

L 149/43

ANNEX I

Holding of 27,47 %

Total shares in
issue

Number held by
AAC, DBCM,
CHIL and
Southern

Shares voted
total
(million)

AAC percentage
total

763 734 144

215 139 925

333,26

64,56 %

768 573 806

215 139 925

– 286,33

75,14 %

768 573 806

215 139 925

773 317 629

215 139 925

776 860 919

215 139 925

778 486 448

215 139 925

782 977 299

215 139 925

295,00

486,10

379,90

400,90

429,80

72,93 %

44,26 %

56,63 %

53,66 %

50,06 %

1993 AGM

1994 AGM

1994 AGM

1995 AGM

1995 EGM

1996 AGM

1996 EGM

Shares in issue at 5.11.1996

782 977 299

215 139 925

Notes: The shareholding of AAC, DBCM, CHIL and Southern has been calculated based on the number of shares held by
these companies at the date of the notification of the operation. This fixed number has then been applied to the total
number of shares polled at shareholders’ meetings during 1993-96.
If the 3,3 % shareholding in Lonrho held by SA Mutual was included in the above figures, the AAC percentage total
would increase by between 5 % and 8 %.

Source: AAC/Lonrho.

L 149/44

EN

Official Journal of the European Communities

20. 5. 98

ANNEX II

Estimated worldwide market shares for 1995

Platinum

Palladium

Rhodium

(%)

Amplats

LPD

Subtotal

Implats

Northam

Total South Africa

Russia

Other

Source: AAC.

Total

[35-40]

[10-15]

[45-50]

[15-20]

[0-5]

68

25

7

100

[10-15]

[0-5]

[15-20]

[5-10]

[0-5]

26

64

10

100

[30-35]

[10-15]

[45-50]

[25-30]

[0-5]

75

20

5

100

20. 5. 98

EN

Official Journal of the European Communities

L 149/45

ANNEX III

Platinum supply 1985-96

(in %)

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

[45-50]

[45-50]

[40-45]

[40-45]

[35-40]

[35-40]

[30-35]

[30-35]

[35-40]

[30-35]

[30-35]

[30-35]

[0-5]

[0-5]

[0-5]

[0-5]

[0-5]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[5-10]

[10-15]

[45-50]

[45-50]

[45-50]

[45-50]

[40-45]

[40-45]

[40-45]

[40-45]

[45-50]

[40-45]

[40-45]

[40-45]

[30-35]

[30-35]

[30-35]

[30-35]

[25-30]

[25-30]

[20-25]

[20-25]

[20-25]

[20-25]

[15-20]

[15-20]

0

8

0

0

10

0

0

13

0

[0-5]

[0-5]

[0-5]

3

2

2

3

2

4

0

12

[0-5]

[0-5]

2

5

0

15

[0-5]

[0-5]

2

5

0

18

[0-5]

[0-5]

2

5

0

25

[0-5]

[0-5]

2

5

0

19

[0-5]

[0-5]

3

6

[0-5]

[0-5]

[0-5]

[0-5]

14

[0-5]

[0-5]

4

6

21

[0-5]

[0-5]

5

6

24

[0-5]

[0-5]

3

6

21

[0-5]

[0-5]

2

7

100

100

100

100

100

100

100

100

100

100

100

100

2 820

2 920

3 215

3 440

3 600

3 945

4 345

4 065

4 665

4 840

5 325

5 220

Amplats

Lonrho

Total

Impala

Northam

Russia

Stillwater

Inco

Other

Recycling

Total

Volume

Source: AAC.