CMA gives Breedon 5 days to address concerns over Cemex deal

(Sharecast News) - The Competition and Markets Authority has given Breedon five working days to put forward some remedies after it found that the construction materials group's £178m acquisition of Cemex raises competition concerns.
Following an initial Phase 1 investigation, the watchdog found the deal gives rise to competition concerns related to the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets across the UK.

It noted that 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 also found that the merger could make it easier for cement suppliers in the East of Scotland to align their behaviour in a way that limits the rivalry between them. 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.

"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 now has five days to come up with some remedies or the merger will be referred for an in-depth Phase 2 investigation.

The company said in a very brief statement that the outcome was broadly in line with its expectations.

It said that given the remedies it has yet to come up with will likely take several months to implement, the former Cemex assets will continue to be held separate from Breedon and operated as Pinnacle Construction Materials.

Broker Peel Hunt said: "We do not think this will be a major surprise to Breedon management, although the number of markets is slightly higher than we would have expected, while the cement comment will also be a bit disappointing.

"However, we think the group will be very keen to avoid a phase 2 investigation given the amount of management resource that would be required to deal with it.

"Overall it looks like a very modest negative against best expectations."