The Competition Commission has recommended that the Competition Tribunal approve the proposed transaction whereby Hulamin Systems intends to acquire the slab business of Isizinda Aluminium without conditions.
The Commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets. The Commission further found that the proposed transaction does not raise any public interest concerns.
Hulamin (40%) and Bingelela Capital (60%) jointly own the slab cast house adjacent to the Hillside aluminium smelter in Richards Bay. This cast house also holds assets for rim alloy, extrusion billet and aluminium rod production. Hulamin and Bingelela have reached an agreement for Hulamin to procure the rolling slab assets from Isizinda.
The two shareholders of Isizinda Aluminium, Bingelela Capital and Hulamin Operations, have agreed on a restructure of Isizinda whereby, inter alia, Hulamin has purchased the rolling slab casting business and assets from Isizinda, subject to regulatory approval, and entered into a lease agreement with Isizinda to continue operating this casting facility. The shareholders of Isizinda have also agreed to pursue the sale of the property, subject to Isizinda’s continued right of occupation in respect of the property, once the subdivision of this property from a larger site owned by South32 has been concluded.
The decision to restructure the business served as an indicator for impairment. An impairment test was conducted and it was determined that the carrying amount of land and buildings exceeds the recoverable value of the property. The property was thus impaired to reflect its recoverable amount, which in this case represents the fair value less costs to sell. The recoverable amount was determined to be R68.7 million. The fair value of the property is level 2 in the valuation hierarchy. The fair value of the property was determined with reference to market-related rental prices per square metre, accepted vacancy rates and maintenance costs per square metre. An independent valuator was used to determine the fair value less costs to sell.
In April 2015 Isizinda Aluminium announced the acquisition of the Bayside casthouse in Richards Bay, KwaZulu-Natal from BHP Billiton. At the time Isizinda concluded a five-year metal supply agreement with BHP Billiton that liquid metal would be supplied by the nearby Hillside smelter directly to the Bayside casthouse. Hulamin in turn concluded a matching slab offtake agreement with Isizinda, with an estimated value of more than R10 billion over the five-year period.