Lafarge, Anglo U.K. Venture Requires Asset Sales, Regulator Says
Anglo American Plc (AAL) and Lafarge SA (LG)’s proposed $2.9 billion U.K. venture will need to sell assets as it could harm competition in the market for cement and other construction materials, the Competition Commission said.
Anglo and Lafarge will be required to dispose of “a significant portfolio of operations, paving the way for entry by a new competitor into the U.K. cement market, before their proposed construction materials joint venture can go ahead,” the Commission said in a statement today.
The venture could increase the danger of “coordination in the market” for bulk cement, and would reduce competition for asphalt and ready-mix concrete. The combination must sell a cement plant in Derbyshire, more than half the group’s ready-mix cement capacity, six aggregate quarries and two asphalt plants. Stakes in two quarries and five aggregate plants Anglo owns through Midlands Quarry Products will also have to be sold.
The creation of the 50-50 venture, intended to help the companies withstand a decline in Britain’s construction industry, would create a business with 1.8 billion pounds ($2.9 billion) in sales and annual cost savings of at least 60 million pounds, they said in a joint statement in February 2011.
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, Paris-based Lafarge predicted on Feb. 17.
Anglo, Lafarge Confident
“The approval is subject to a number of conditions which we are confident the parties can meet,” London-based Anglo said in an e-mailed statement today.“We look forward to working with the regulators on the effective implementation of the undertakings and the conclusion of the JV as soon as practicable.”
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 British Aggregates Association trade group has said the U.K. market is dominated by Anglo American, Germany’s HeidelbergCement AG (HEI), Switzerland’s Holcim Ltd. (HOLN), Lafarge and Mexico’s Cemex SAB.
“Whilst certain assets will require divestment, the combination of the two businesses is expected to deliver recurring synergies through increased operational efficiencies, improved logistics and value-added products,” Lafarge said in an e-mailed statement.