No go for Tarmac and Lafarge joint venture

PLANS for a merger between Midlands building industry giants Tarmac and Lafarge have been scuppered by the Competition Commission which has ruled the joint venture would be anti-competitive.

The body has provisionally ruled that the proposed joint venture between Tarmac owner Anglo American and Lafarge could damage competition in the construction materials market.

Anglo American, through its UK subsidiary Tarmac – which is based in Wolverhampton – and Solihull-headquartered Lafarge were keen to establish a 50:50 UK joint venture.

But the commission’s provisional findings are that the merger could lead to a lessening of competition in markets including the supply of bulk cement, the supply of rail ballast and the supply of asphalt and readymix in specific local markets.

Roger Witcomb, chairman of the Anglo/Lafarge Inquiry Group, said: “We have a number of concerns about this joint venture.

‘In bulk cement there are currently only four UK producers, and there is evidence that the market is not as competitive as it could be. Prices and profit margins haven’t been affected in the way we would have expected following the big falls in the demand for cement in the past few years. We have not reached a view on whether or not there has been coordination in the bulk cement market. But we are concerned that the proposed tie-up would increase the susceptibility of this market to coordination.

“The tie-up could also reduce competition for two specific aggregates products – rail ballast and high purity limestone used for flue gas desulphurization – because of the shortage of alternative suppliers.”

Witcomb said this has been a particularly complex investigation because of the number of different products, the varying degrees of substitutability between them, and the fact that cement is an input into RMX and aggregates are an input into both RMX and asphalt.

“We have therefore had to examine competitive conditions in a large number of local markets for these products in coming to our view on the likely effect of the proposed joint venture on competition,” he said.

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