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European Commission reportedly refuses Holcim-Cemex Spanish transaction

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World Cement,

Following an in-depth investigation into the acquisition of Holcim’s Spanish operations by Cemex, it is being reported that the European Commission has objected to the proposed acquisition. Reuters is reporting that the Commission has sent a list of objections to the two companies, the main problem being that the Commission believes the deal would impede competition in the market.

The Spanish deal is related to two other transactions between Cemex and Holcim in the Czech Republic and western Germany, respectively. Both of the other transactions have been cleared by the relevant authorities. The Commission opened an investigation into the Spanish deal in April over concerns it may reduce competition in certain areas where the two companies’ activities overlap.

Under the terms of the deal, Cemex intends to acquire sole control over the whole of Holcim's activities in cement, ready-mix concrete, aggregates and mortar in Spain.

As World Cement reported in April, the Commission's assessment takes account of the specific characteristics of the cement industry in some areas of Spain, including the high level of concentration, high entry costs, the importance of commercial and structural links between firms and the level of transparency of cement prices and output. In this context, the removal of Holcim could facilitate coordination between the remaining competitors in this market. Indeed, the Commission was concerned that collusion based on an allocation of customers and parallel increase of prices could become more effective and sustainable because of the reduction in the number of independent competitors and the fact that the remaining players would be more similar (so-called “market symmetry”).

Moreover, at that time, the Commission stated that its investigation has shown that the merged entity might be able to exercise significant influence on the level of prices for grey cement in certain other areas, where the parties are strong rivals and the remaining competitors (such as Cementos La Cruz and Cementos La Unión among others) might not be able to react to a price increase.

No doubt further details of the Commission’s objections and proposals for an alternate deal will become available in due course.

Edited from various sources by

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