The UK OFT (Office of Fair Trading) has referred the proposed UK construction materials joint venture between Anglo American and Lafarge to the Competition Commission for further investigation.
The UK OFT ( Office of Fair Trading) has referred the proposed UK construction materials joint venture between Anglo American and Lafarge to the Competition Commission for further investigation.
The OFT says that Anglo American, through its UK subsidiary, Tarmac, and Lafarge are both global companies that are active in the supply of construction materials in the UK.
The parties propose to establish a 50:50 joint venture to which each of them would contribute the bulk of their construction materials businesses in the UK.
“The proposed joint venture involves overlaps between the parties’ activities in a number of product markets, at local, regional and national level. In addition, vertical supply relationships arise between the parties’ activities, which may impact on the ability of suppliers in certain markets to compete.
“The parties provided a significant quantity of information and analysis to the OFT to inform its review. The OFT also received information from around 300 customers and competitors of the two parties as part of its merger investigation,” says the OFT.
The OFT has concluded that competition concerns arise in a number of markets that justify a reference of the proposed joint venture to the Competition Commission. These are overlaps in the supply of aggregates, asphalt and ready-mixed concrete in a large number of local areas (as well as particular types of aggregates at regional and national level); an overlap in the supply of bulk grey cement at a regional and/or national level, as well as, separately, an increased prospect of coordination in the supply of bulk grey cement, and a concern that the joint venture could foreclose independent ready-mix concrete suppliers by making it substantially more difficult for them to source bulk grey cement at competitive prices.
Ali Nikpay, OFT senior director and decision-maker in this case, said: “The proposed joint venture would bring together Tarmac’s and Lafarge’s construction material assets in the UK. This represents a significant structural change in this sector and raises serious competition issues in several markets which need to be considered in detail by the Competition Commission.
“Although the parties did offer to divest a variety of assets in order to try to resolve the issues identified, we are not confident that the package proposed would clearly remove our concerns in all areas.”
In a statement Anglo American said: “We note the OFT’s decision to refer the proposed 50:50 joint venture to combine the assets of Tarmac UK and Lafarge UK for review by the Competition Commission. This marks the next stage in the regulatory process and we will work with the Competition Commission with the aim of achieving clearance of the joint venture as soon as possible. In the meantime, Tarmac UK and Lafarge UK operations will continue to operate independently.
“The proposed JV remains an exciting opportunity for both companies and will create a leading UK construction materials company, with a portfolio of high quality assets drawing on the complementary geographical distribution of operations and assets, the skills of two experienced management teams and a portfolio of well-known and innovative brands.”
