Commission demands Lafarge/Anglo asset sale, UK

The UK’s Competition Commission (CC) has said Anglo American PLC and Lafarge must sell a significant portfolio of operations before their proposed construction materials joint venture can go ahead.

Anglo American, through its UK subsidiary Tarmac, and Lafarge are both global firms that supply construction materials in the UK. The parties 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 CC provisionally ruled that the joint venture between Anglo American and Lafarge could damage competition in certain markets for construction materials. In its final report published today, the CC has reiterated its concern 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,” it said in a statement.

To address these concerns, Anglo American and Lafarge will now be required to sell:
• Hope cement works, Derbyshire as well as the nearby Dowlow quarry and three linked rail depots
• a substantial network of ready-mix plants, representing well over half of the proposed joint venture’s ready-mix 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.

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 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.

“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.”

Lafarge and Anglo American said they are confident the conditions proposed by the commission will be met.