Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC approves acquisition of Cemex West by Holcim in Germany, (Jun 5, 2014)

By Linda O’Brien, J.D., LL.M.

The European Commission (EC) announced today that it has cleared under European Union (EU) merger regulations the proposed acquisition of Cemex West by its Swiss rival Holcim. Cemex and Holcim are global suppliers of cement and other building materials. Cemex West comprises its activities in grey cement, ready-mix concrete, aggregates, and cement materials in western Germany together with a small number of plants and sites located in France and the Netherlands.

Following an in-depth investigation, the Commission concluded that the acquisition would not raise competition concerns since the merged entity will continue to face sufficient competition from its rivals in all markets concerned. The Commission was notified of the transaction on September 3, 2013.

Holcim is a Swiss-based global supplier of cement, aggregates, ready-mix concrete, and asphalt and cement materials with operations in more than 70 countries. Cemex West consists of a number of operating entities which are subsidiaries of the Cemex Group, headquartered in Mexico. The Cemex Group is a global building materials company active worldwide in cement, ready-mix concrete, aggregates and related building materials. The Cemex West assets are located in North Rhine-Westphalia, Rhineland-Palatinate, and Saarland in Germany with some assets in France and the Netherlands near the German border.

In October 2013, the Commission opened an investigation over concerns that the proposed transaction could substantially lessen competition by removing Cemex West as an actual or potential competitor in parts of Germany and in Belgium. The Commission was also concerned that the transaction could enable grey cement producers to coordinate their market behavior, or facilitate such coordination, by potentially removing incentives for competitors to expand in regions where Holcim is strong, such as in Belgium and northern Germany.

In addition, the EC was concerned about the effect of the transaction on competition in the market for granulated blast furnace slag (“GBS”), a cement material. GBS is a by-product of steel production that is used as a substitute for clinker in the production of cement and, in its ground form, as a substitute for cement in the production of concrete. The Commission was concerned that the transaction could enable the merged entity to raise GBS prices in the absence of a sufficient competitive constraint from the remaining suppliers.

However, the Commission's in-depth investigation has shown that the merged entity will face competition from a number of players in the various geographic markets around the parties' grey cement production facilities in Germany, Belgium, and north-eastern France. Holcim and Cemex West do not impose significant competitive constraints on each other in those markets. As such the transaction will not lead to the elimination of an important actual or potential competitor to Holcim.

The EC's investigation also covered whether the transaction would give rise to or facilitate market coordination in the grey cement markets. Those markets are prone to coordination due to, among other things, the homogeneity of the product, the presence of the same competitors in different geographic markets, and a certain level of market transparency. However, the Commission concluded that the transaction itself was unlikely to result in making any such potential coordination easier, more stable, or more effective to a degree that would raise competition concerns.

Moreover, the EC found that the merged entity will continue to face competition from a number of competitors in the markets for GBS, in particular from steel manufacturers, with appreciable market shares. The Commission also found that there is currently an oversupply of GBS in the market. The Commission therefore concluded that the transaction would not raise competition concerns.

The Cemex West acquisition is linked to another transaction in which Cemex will acquire control of the whole of Holcim's activities in cement, ready-mix concrete and aggregates in the Czech Republic and Spain. This second transaction does not meet the turnover thresholds of the Merger Regulation and was therefore notified to the Spanish and Czech competition authorities. The Commission accepted a request from Spain to assess the part of the second transaction related to Spain and opened an in-depth investigation in that case in April 2014.

The Czech competition authority elected not to join the Spanish referral request and cleared Cemex's acquisition of Holcim's activities in the Czech Republic without conditions after an in-depth investigation in March 2014.

Companies: Cemex West; Holcim

News: Antitrust IndustryNewsTrends