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Update: Tarmac and Lafarge UK joint venture ruling

World Cement,

In February 2012, the Competition Commission (CC) announced the provisional findings of its investigations into the proposed joint venture between Lafarge UK and Tarmac, the UK subsidiary of Anglo American. The CC expressed concerns that the 50:50 joint venture, which would involve a substantial portion of each company’s construction materials businesses, could limit competition in local UK markets for aggregates, cement, high purity limestone and ready-mix concrete, among others.

The CC has now published its final report on the matter, which requires Tarmac and Lafarge to sell a significant share of their operations if the venture is to go ahead. The report highlights a range of operations, including:

  • Hope cement plant, Derbyshire, Dowlow quarry and connecting rail depots.
  • More than half of the ready-mix concrete plants put forward for inclusion in the joint venture.
  • Six aggregate quarries, as well as Tarmac’s share in two further quarries.
  • Two asphalt plants and Tarmac’s share in five further plants.

The CC has indicated that the Hope cement plant, Dowlow quarry and rail depots should be bought by a single buyer, along with a majority of the ready-mix cement plants. The sale must be completed before the joint venture can proceed.

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 range and size of this remedies package is a consequence of the range and size of the proposed joint venture. […] 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,” he continued.

Lafarge has stated that it welcomes the CC’s decision to approve the joint venture despite the imposed requirements: “The approval is subject to a number of conditions which both Lafarge and Anglo American are confident can be met. Whilst certain assets will require divestment, the combination of the two businesses is expected to deliver recurring synergies through increased operational efficiencies, improved logistics and value-added products.”

Adapted from press release by Louise Fordham.

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