The Competition Commission has recommended that the Competition Tribunal approve the proposed transaction, with conditions, whereby Barnes Southern Palace intends to acquire steel maker Scaw from the Industrial Development Corporation (IDC).

Barnes Southern Palace is a consortium involving the Barnes Group Holdings and Southern Palace Group, where Barnes and its subsidiaries and affiliated companies are active in the manufacturing of wire, wire products and other related products, while Southern Palace is a wholly-owned and managed black investment holding company with diverse interests in real estate, industrial companies, information technology, metals, mining and construction.

Scaw currently comprises four divisions, namely cast products, grinding media products, wire rod products and rolled products.

The rolled products and wire rod divisions are the two divisions that Barnes Southern Palace is acquiring. Scaw beneficiates iron-ore and scrap to produce a range of steel products used in the mining, rail, power, offshore oil and gas, construction, commercial and other industrial sectors.

The commission found that the proposed transaction was unlikely to result in any input or customer foreclosure concerns in the market for the long steel products and in the market for wire and wire products.

However, the commission found that the proposed transaction may increase the likelihood of coordination, as well as create a platform for the sharing of competitively sensitive information between Barnes and Consolidated Wire Industries (CWI), which is owned by the IDC, as the IDC will retain a minority shareholding in Scaw post-merger.

To address the information-sharing concerns, the commission recommended that the proposed transaction be approved with conditions, which shall ensure that, for as long as the IDC was able to appoint directors to the respective boards of CWI and Scaw, it would ensure that its representatives on the board of Scaw were not the same persons serving, nominated and/or appointed on any board or management committees or subcommittees of CWI.

Further, the nominees appointed by the IDC to the board of Scaw shall not have served on the board of directors and/or management committees or subcommittees of CWI, for a period of one year prior to being nominated to the board of Scaw.

The commission, the merging parties and the Economic Development Department have also agreed on certain employment conditions, as well as conditions that would ensure that the merged entity would supply small steel mills with direct reduced iron, enabling them to produce better-quality steel.