LafargeHolcim: South Africa’s Competition Commission approves merger on one condition

South Africa: approval with conditions

South Africa’s Competition Commission has announced its decision regarding the proposed LafargeHolcim merger in reference to the impact it would have upon the country’s cement industry. The Commission has granted approval on the condition that Holcim divests its stake in Afrisam. Holcim must dispose of its shareholding within the three years following final approval of the merger. The competition authority has outlined its reasoning for imposing this condition:

‘Holcim and Lafarge are cement producers operating internationally, although Holcim exited the South African market a few years ago save for a stake it held in Afrisam (Pty) Ltd (“Afrisam”). Effectively, up until this transaction, it is only Lafarge that operated in South Africa. The Commission found that Holcim’s shareholding interest in Afrisam, a cement producer in South Africa, would present anti-competitive effects post-merger. This is due to the fact that the shareholding creates an undesirable structural link between Holcim and Afrisam in that it provides Holcim with access to Afrisam’s commercially sensitive information.’

‘The Commission’s investigation established that absent this shareholding, Holcim would not have access to this commercially sensitive information. The Commission also noted that up until recently, Holcim and Afrisam were party to an agreement in terms of which Holcim rendered certain technical assistance to Afrisam. This assistance also provided Holcim with information that it ordinarily would not have about a competitor’s business.

The Commission found that the shareholding by Holcim in competitors, being Lafarge and Afrisam, would create a platform for information sharing and tacit collusion in the cement industry post-merger and thus substantially lessen competition. This is compounded by the history of collusion in the South African cement industry and globally involving the merging parties, the high concentration levels and barriers to entry in the cement industry.’

‘To address the competition concerns, the Commission approved this merger on condition that Holcim divests of the shareholding in Afrisam within a period of 3 years after approval of the merger.’

The body’s Acting Deputy Commissioner, Hardin Ratshisusu, added: “Cross shareholdings between competitors, particularly, in highly concentrated sectors are a recipe for collusion. The conditions imposed on this merger ameliorate the competition concerns the merger would have presented.”

Disposed asset buyers: rumours abound

A recent report by Reuters contends that certain building material firms are partnering to strengthen their bid for the assets to be disposed by Lafarge and Holcim as part of their merger proposal. Citing ‘several people familiar with the matter’, Reuters reports that Brazil’s Votorantim Cimentos is teaming up with HeidelbergCement, and Ireland’s CRH is partnering with Cemex to launch joint bids for the complete portfolio of assets. Speculation has been rife about who will acquire the operations, and whether the assets will be purchased in a piecemeal fashion or as part of a bid that covers the entire portfolio. Votorantim and CRH have previously been listed among the companies that may be interested in buying assets from Lafarge and Holcim, with suggestions that CRH may sell off its brick division in order to raise capital. Other companies linked to the sale include Turkey’s Sabanci Holding and Colombia’s Cementos Argos.

Edited from various sources by Louise Fordham

Sources:

• Reuters.
• El Tiempo.
• South African Competition Commission.
• Financial News.

Read the article online at: https://www.worldcement.com/africa-middle-east/09102014/south-africa-lafarge-holcim-merger-approved-with-one-condition-627/