Breedon will also face several years of price control for asphalt produced in the Inverness area.
The measures to preserve competition and protect customer interests follow an inquiry into Breedon’s acquisition of a package of assets from Aggregate Industries UK Limited (AI). Breedon said that it will now work with the Competition & Markets Authority (CMA) to finalise the terms of the divestments and undertakings within 12 weeks. It said that it has every intention of reaching agreement with the CMA as quickly as possible, in order that it can expedite the sale of the assets concerned and proceed with the full integration of the former AI businesses.
The CMA - which has taken over the case from the Competition Commission (CC) - has found in its final report that this acquisition would lead to a reduction of competition in three areas of north-east Scotland. This confirms the CC’s provisional findings, which were published in February.
Breedon completed the acquisition in April 2013, which included 11 aggregate quarries, four asphalt plants, nine ready-mix concrete plants and two concrete block factories, located at 18 sites in north Scotland. Prior to the acquisition Breedon was the largest supplier of these products in north-east Scotland.
In its final report, the CMA states that Breedon and Aggregate Industries were previously competitors for many of these products across north-east Scotland and that asphalt customers in Aberdeen and Inverness, as well as ready-mix concrete customers in Peterhead, could face higher prices due to the loss of competition and lack of alternative suppliers.
Breedon must sell either the Tom’s Forest or Craigenlow asphalt plant and one of the Peterhead or Stirlinghill RMX plants to a competitor approved by the CMA. Because the competition concerns in relation to the asphalt market in Inverness are expected to be short term, asphalt supplied by the company will be subject to a price control in that area until 2018 at the latest.
Simon Polito, chair of the inquiry group and CMA Deputy Chair, said: “Both these products are vital for construction projects and road building, much of which is funded by the public purse. It is therefore important to ensure customer interests are protected, which we are doing through the plant sales and price control.
“The markets for these products are local so the loss of a competitor in even a relatively small area matters – particularly when the cost and proximity of the production site are the most important factors for customers and in a market where most prices are negotiated.”