CMA finds competition risks in Breedon's Cemex deal

27/08/2020
Chris Ames

The competition watchdog has found that Breedon’s acquisition of CEMEX UK gives rise to competition concerns and given the parties five days to propose acceptable undertakings or face an in-depth investigation.

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.

The Competition and Markets Authority (CMA) pointed out that Breedon Group and Cemex are two of the leading producers and distributors of construction materials in the UK and Ireland.

It said that following its Phase 1 investigation, it had 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.

It added that in all of these local markets, the two businesses currently have a large presence and compete closely, with limited competition from other suppliers.

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.'

The CMA said it 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. It found that this could result in cement suppliers competing less strongly for certain customers in the region.

‘The CMA is therefore concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for UK construction projects.’

The CMA said Breedon and Cemex must address its concerns within five working days (from 26 August). ‘If they are unable to do so, the merger will be referred for an in-depth Phase 2 investigation.’

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