Xstrata Plc - proposed acquisition of Centennial Coal Company Ltd

Summary

Swiss resources group Xstrata plc is seeking to acquire assets of Centennial Coal Company Limited (Centennial).

Market definition

The ACCC considered that the relevant markets are the national markets for the supply of:
- Thermal coal; and
- Metallurgical coal or coking coal.

Competition analysis

The ACCC considered that the proposed acquisition is unlikely to result in a substantial lessening of competition in national markets for the supply of thermal and metallurgical coal. Factors which led to this conclusion include:
- both parties export the majority of their coal;
- the market concentration of the merged entity would not be sufficient to raise competition concerns, as Centennial represents a small proportion of Australian production of thermal and metallurgical coal and the proposed acquisition would only marginally increase Xstrata's market share;
- there are sufficient alternative suppliers, including BHP and Rio Tinto; and
- countervailing pressure from the owners and operators of electricity utilities is likely to constrain the merged entity.