In February, the Competition Commission (CC) provisionally ruled that the joint venture between Tarmac parent Anglo American and Lafarge could damage competition in certain markets for construction materials.
In its final report the CC has reiterated its concern that the deal would be bad for competition and directed the companies to sell:
- a cement plant in Hope, Derbyshire as well as the nearby Dowlow quarry and three linked rail depots
- a substantial network of readymix (RMX) plants, representing well over half of the proposed joint venture’s RMX capacity
- six aggregate quarries as well as Tarmac’s share of two quarries owned through its Midlands Quarry Products (MQP) joint venture with Hanson - and one rail depot, and
- two asphalt plants as well as Tarmac’s share of five plants owned through MQP.
The Competition Commission said that details of how the assets will be sold and packaged will be finalised after publication of the final report, but it is envisaged that the Hope plant and supporting operations including the Dowlow quarry and a substantial network of RMX plants will go to a single buyer, the CC said. This sale will have to be completed before the joint venture can go ahead.
Breedon Aggregates issued a statement saying: "Breedon has in the past indicated its interest in any assets which may become available through this divestiture programme, in line with its stated strategy of consolidating the heavyside end of the UK building materials industry. The company will assess any specific opportunities once further details on the proposed disposals have been made available."
Chairman of the CC’s Anglo/Lafarge inquiry group, Roger Witcomb, said: “A large-scale disposal like this is the only way to get a new entrant of sufficient scale to break into the UK cement market and thereby ensure that this joint venture does not damage competition. In bulk cement, there are currently only four UK producers and there is evidence that competition is not as effective as it could be. So, if the joint venture is to go ahead, it is essential to maintain the number of cement producers by bringing in a new player through the sale of the Hope cement plant—one of the largest in the country.
“The combination of the two parties’ RMX businesses as originally proposed would have played a significant role in increasing the potential for coordination in the cement market. The sales will address that issue as well.
“The disposals will also remedy the loss of competition for the supply of RMX, aggregates and asphalt in particular areas of the country, given that the markets for these materials are quite localized, as well as for two specialist aggregates products—rail ballast and high purity limestone used for flue gas desulphurization in coal-fired power stations.
“The range and size of this remedies package is a consequence of the range and size of the proposed joint venture. Our investigation covered seven major products in over 250 geographic areas. Complexity was increased by the links between the products—aggregates are a key input into RMX and asphalt, and cement is the other key input into RMX.
“We believe that these extensive sales will help protect all customers’ interests in these key markets, which is particularly important when one considers how much construction work is funded by the public purse."
Anglo American, through its UK subsidiary Tarmac, and Lafarge are both global firms that supply construction materials in the UK. The parties proposed to establish a 50:50 joint venture, to which each of them would contribute the bulk of their UK construction materials businesses. The two parties’ main overlapping activities in relation to the joint venture are in the production and supply of cement, aggregates, asphalt and RMX.
In its final report, the CC has concluded that the joint venture could lead to a substantial lessening of competition in the markets for:
- the supply of bulk cement
- the supply of rail ballast
- the supply of high purity limestone, when used for flue gas desulphurization (the abatement of acid gas emissions from coal-fired power stations)
- the supply of primary aggregates for construction applications in 19 local markets
- the supply of asphalt in two local markets
- the supply of RMX in seven local markets.