£178m building supplies deal in doubt over ‘serious competition concerns’
A deal by Leicestershire-based building materials supplier Breedon to buy around 100 CEMEX sites raises “serious competition concerns’, according to the Competition and Markets Authority (CMA).
Breedon announced in January that it had agreed a £178m deal to buy approximately 100 Cemex sites, including aggregates quarries, ready-mixed concrete facilities, asphalt plants and a cement terminal, across the UK.
A statement from the CMA said: “Following its initial Phase 1 investigation, the Competition and Markets Authority (CMA) found that the deal gives rise to competition concerns in relation to the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets across the UK. In all of these local markets, the two businesses currently have a large presence and compete closely, with limited competition from other suppliers.”
The CMA has also found that the merger could make it easier for cement suppliers in the East of Scotland to align their behaviour, without necessarily entering into any express agreement or direct communication, in a way that limits the rivalry between them. The CMA said that this could result in cement suppliers competing less strongly for certain customers in the region.
Colin Raftery, CMA senior director said: “These products are widely used in a range of building projects across the UK, and account for a material part of the construction costs faced by businesses and public bodies. As the majority of these materials are sourced locally, it’s vital to ensure that enough competition will remain at the local level so there’s enough choice and prices remain fair.
“While sufficient competition will remain in most areas, we are concerned that the deal could result in high prices and lower quality products in some areas where Breedon wouldn’t face sufficient competition.”
Breedon and Cemex must now address the CMA’s concerns within five working days. If they are unable to do so, the merger will be referred for an in-depth Phase 2 investigation.
Responding, Breedon said: “The outcome is broadly in line with Breedon’s expectations and the company now has a short period during which to offer remedies to address the CMA’s outstanding concerns. These are expected to take several months to implement, during which time the former CEMEX assets will continue to be held separate from Breedon and operated as Pinnacle Construction Materials.”
