A £178 million plan to mix cement companies could fail over concerns of price ‘alignment’ in the East of Scotland.
The Competition and Markets Authority (CMA) today said it planned to dig deeper into competition concerns at plans by building materials giant Breedon to acquire sites owned by Cemex.
Breedon announced in January 2020 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.
Following its initial phase 1 investigation, the CMA said it was concerned the deal could lessen competition and lead to higher prices and lower quality building materials.
The CMA identified 15 local markets where the two businesses currently have a large presence and compete closely, with limited competition from other suppliers.
It found 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 this could result in cement suppliers competing less strongly for certain customers in the region.
CMA senior director Colin Raftery 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.”
The companies must address the watchdog’s concerns within five days or the deal will be referred to a more in-depth phase two investigation.
“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,” Mr Raftery said.
Breedon said it had completed the acquisition on July 31.
“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,” Breedon added.
“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.”
