The Competition & Markets Authority (CMA) is concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for UK construction projects.
Breedon completed the £178m acquisition from Cemex on 31st July of 49 ready-mix plants, 28 aggregate quarries, four depots, one cement terminal, 14 asphalt plants and four concrete products operations.
An initial phase one investigation by the Competition & Markets Authority (CMA) found that the deal gives rise to competition concerns in relation to the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets across the UK.
It was particularly concerned that the merger could make it easier for cement suppliers in the east of Scotland “to align their behaviour, without necessarily entering into any express agreement or direct communication, in a way that limits the rivalry between them”.
The CMA said today that Breedon and Cemex must now address its concerns within five working days. If they are unable to do so, the merger will be referred for an in-depth phase two investigation.
CMA senior director Colin Raftery, said: “These products are widely used in a range of building projects across the UK, and account for a material part of the construction costs faced by businesses and public bodies. As the majority of these materials are sourced locally, it’s vital to ensure that enough competition will remain at the local level so there’s enough choice and prices remain fair.
“While sufficient competition will remain in most areas, we are concerned that the deal could result in high prices and lower quality products in some areas where Breedon wouldn’t face sufficient competition.”
Earlier this month the CMA instructed Breedon to hold the acquired assets in a separate company from Breedon until it had completed its investigation.
Breedon responded to the latest CMA intervention with this statement: “The outcome is broadly in line with Breedon's expectations and the company now has a short period during which to offer remedies to address the CMA's outstanding concerns. These are expected to take several months to implement, during which time the former Cemex assets will continue to be held separate from Breedon and operated as Pinnacle Construction Materials.”