Tarmac and Lafarge ordered to sell off plants

Grant Prior 10 years ago
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The Competition Commission has ruled that Tarmac owner Anglo American and Lafarge must sell a large chunk of their operations before a proposed joint venture in the UK can go ahead.

The move will see another major player enter the domestic cement market to head-off price rise fears due to lack of competition.

Breedon has already confirmed it will be a potential buyer.

The commission first raised concerns about the joint venture plans earlier this year.

It said today that the joint venture “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).”

Tarmac and Lafarge will now be required to sell a swathe of their operations including:

  • 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.

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.

Chairman of the 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.”

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