Anglo American Plc (AAL) and Lafarge SA (LG)’s proposed U.K. joint venture could damage competition in the market for bulk cement and other construction materials, the country’s Competition Commission said today.
“We have a number of concerns about this joint venture,” Roger Witcomb, chairman of the commission’s Anglo-Lafarge inquiry group, said in a statement on its provisional findings today.
The venture could reduce competition in the markets for the supply of bulk cement, rail ballast and high-purity limestone for emissions abatement from coal-fired power stations, the commission said. The agency is also concerned about its impact on the supply of construction aggregates in 23 local markets, and asphalt in two markets.
The creation of the 50-50 venture, intended to help the two companies withstand a decline in Britain’s construction industry, would create a business with 1.8 billion pounds ($2.85 billion) in sales and annual cost savings of at least 60 million pounds, they said in a joint statement in February 2011.
The two companies are “confident” they can address the antitrust concerns, Paris-based Lafarge said in a statement.
Lafarge Chief Executive Officer Bruno Lafont plans to sell more than 1 billion euros ($1.3 billion) of assets this year and deepen cost cuts amid higher raw material prices as he seeks to repair a credit rating that has fallen below investment grade. Cement demand in the U.K. may drop as much as 5 percent this year because of austerity measures and slowing economic growth, Lafarge predicted on Feb. 17.
“We are now consulting on the possible actions we could take in response to the reductions in competition we have found, bearing in mind the close links that exist between the different product markets,” Witcomb said.
The commission invited comments on possible remedies by March 6, and on its provisional findings by March 13.
“We continue to work with the Competition Commission to address the issues raised in their provisional findings and continue to believe in the strategic rationale of the transaction,” London-based Anglo American said in a statement.
The venture is intended to absorb Anglo’s Tarmac unit in the U.K. as the miner of copper and iron ore exits the materials business, the company said last year.
The U.K.’s Office of Free Trading referred the case to the commission in September, and a final report is due by May 1.
The British Aggregates Association trade group has said the U.K. market is dominated by London-based Anglo American, Germany’s HeidelbergCement AG (HEI), Switzerland’s Holcim Ltd. (HOLN), Paris- based Lafarge and Mexico’s Cemex SAB.
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