The FINANCIAL -- The U.K.'s
Competition Commission said Tuesday it has provisionally decided that a
joint venture between U.K.-listed Anglo American PLC and
France's Lafarge S.A. could damage competition in certain U.K.
markets for construction materials.
Globally diversified miner Anglo American, through its U.K. unit Tarmac Ltd., and French construction company Lafarge announced plans in February 2011 to combine their U.K. construction materials businesses in a joint venture equally owned by the two.
According to London Stock Exchange, the Competition Commission concluded in its provisional summary published Tuesday that the joint venture could lead to substantially less competition in the markets for the U.K. bulk cement, rail ballast, and high-purity limestone, which is used in flue gas desulfurization scrubbers for coal-fired power stations.
It also raised concerns about the supply of primary aggregates for construction applications in 23 local markets, asphalt supply in two local markets and the Ready Mix Concrete or RMX supply in seven local markets.
The joint venture would reduce U.K. bulk cement producers to three from four and although the commission hasn't found evidence of collusion, it noted that cement prices and profit margins haven't been affected in the way it would have anticipated following a drop in cement demand over the past few years.
Witcomb said the commission is now consulting on the actions that it could take in response to the competition concerns. It has published possible remedies that include barring the joint venture or requiring partial divestitures in an orderly manner. It said that behavioral adjustments wouldn't be sufficient to allay competition concerns.
The two companies acknowledged the commission's statement and said they would continue to work together to secure swift approval for the joint venture.
Lafarge said in a statement that both companies are confident "that the concerns expressed in the Competition Commission's provisional findings can be remedied and effective competition maintained in the sector."
Liberum Capital said in a note that the news was a small negative for Anglo American but not surprising and would likely be resolved through disposals.
The Financial Times reported in May that the two companies were likely to dispose around GBP600 million worth of cement plants, quarries and concrete mills to avoid anti-competitive action.
The commission said it will accept comments on its provisional findings until March 13 and possible remedies until March 6. The commission must publish its report by May 1.
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