Breedon struck a deal in November 2015 to take over Hope Construction Materials from India’s Mittal family for £336m.
After an initial investigation, the Competitions & Markets Authority (CMA) has said there are no concerns about competition in aggregate supply being damaged by the merger but there were some concerns about ready-mixed concrete (RMX) supply. It has told Breedon to address this or face a detailed investigation. It has just one week, until Tuesday 19th April 2016, to offer undertakings that might be accepted by the CMA.
This is not expected to be a problem for Breedon. It said that it was ready to propose disposing of approximately 12 to 15 sites.
The CMA said that Breedon and Hope operate more than 200 RMX sites across England, Wales and Scotland and are currently major competitors. The CMA said that the merger “gives rise to competition concerns in relation to 27 RMX sites, meaning that customers might face higher prices as a result of the merger in the local areas surrounding these sites”.
Sheldon Mills, CMA senior director of mergers, and decision-maker in the initial investigation, said: "Ready mixed concrete is an essential product for a wide range of construction projects of all sizes in the public and private sectors. The vast majority of the merger raises no concerns but there are a number of areas where the companies compete strongly with each other for customers and the concern is that loss of such rivalry could lead to price rises for customers. The businesses may now resolve these concerns or face a detailed investigation."
In response, Breedon issued a statement saying that the CMA’s initial verdict was much as it had been expecting and it would be proposing remedies. “This outcome is 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. Subject to agreement with the CMA on appropriate remedies, Breedon expects to complete the acquisition later this summer in line with previous guidance.”