Tarmac and Lafarge have been given the green light to form a joint venture but must sell a number of aggregates quarries and cement plants, the Competition Commission said today.
Global construction material suppliers Anglo American, which owns UK subsidiary Tarmac, and Lafarge have proposed to establish a 50:50 joint venture, to which each of them would contribute the bulk of their construction materials businesses in the UK.
In February, the commission said the jv could damage competition in certain markets for construction materials.
In its final report, the commission has reiterated its concern that the jv would increase the danger of coordination in the market for bulk cement and would reduce competition in local and national markets for other products including aggregates, asphalt and ready-mix concrete (RMX).
The two parties’ main overlapping activities are in the production and supply of cement, aggregates, asphalt and RMX.
The firms have been told to sell:
- a cement plant in Hope, Derbyshire as well as the nearby Dowlow quarry and three linked rail depots;
- a substantial network of 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 precise 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. This sale will have to be completed before the joint venture can go ahead
Roger Witcomb, chairman of the commission’s Anglo/Lafarge Inquiry Group, 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.”
He said 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”. He added 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 localised.
A spokesman for Anglo American said: “The approval is subject to a number of conditions which we are confident the parties can meet. The strategic rationale for the jv remains clear and this offers an exciting opportunity to develop a leading UK construction materials company.
“We look forward to working with the regulators on the effective implementation of the undertakings and the conclusion of the jv as soon as practicable.”