(Alliance News) - Breedon Group PLC on Wednesday said it will work to address the concerns of the the UK Competition & Markets Authority after the regulator said its acquisition of the UK operations of Mexico's Cemex presents competition concerns.
Breedon had announced the GBP178 million purchase of the UK assets of Mexican building materials peer Cemex SAB de CV back in January. At the time, it said it expected the purchase to be completed in the second quarter of 2020.
Cemex's UK assets encompass approximately 100 operations across six divisions located in Scotland, Wales, North-East England, Norfolk, the East Midlands and Yorkshire.
On Wednesday, the UK CMA noted that Breedon and Cemex UK Operations Ltd are two of the leading producers and distributors of construction materials in the UK and Ireland, adding that following its initial Phase 1 investigation it has 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 also said it has 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, resulting in cement suppliers competing less strongly for some customers in the region.
"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," said Colin Raftery, senior director at the CMA.
The regulator has given Breedon and Cemex five days to address its concerns. Failure to do so would result in the merger being referred for an in-depth Phase 2 investigation.
In response, Breedon said the CMA's findings are in line with its expectations.
"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," it added.
Earlier in August, Breedon said it had completed the GBP178 million acquisition of assets and operations from Cemex.
At the time, the Derby-based company said the acquisition brings with it a portfolio of well-located operations with a team of some 650 employees and a further 170 million tonnes of mineral reserves and resources. It added the purchase will strengthen its regional footprint in the UK and provide a platform for future expansion.
Shares in Breedon were trading 0.8% higher at 77.60 pence each on Wednesday morning in London.
By Ife Taiwo; ifetaiwo@alliancenews.com
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