Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EC opens in-depth investigation into cement supplier’s proposed acquisition in Germany, (Oct 22, 2013)

By Jeffrey May, J.D.

Global cement supplier Holcim’s proposed acquisition of operations from rival Cemexin western Germany (Cemex West) is the subject of an in-depth investigation announced today by the European Commission (EC). The EC expressed concern that the transaction might reduce competition in parts of Germany and Belgium where Cemex West is an actual or potential competitor of Holcim.

On August 28, Swiss-based Holcim announced a series of transactions with Cemex Group, which is based in Mexico. Holcim disclosed its intention to purchase Cemex operations in the western part of Germany, including one cement plant, two grinding stations, one slag granulator, 22 aggregates locations, and 79 ready-mix plants. The company intends to combine these assets with its existing Northern German operations. This is the transaction that is now subject to the in-depth investigation.

In addition, Cemex plans to take over Holcim’s Czech Republic operations, consisting of one cement plant, 17 ready mix plants, and four aggregates quarries. In Spain, the companies would combine their operations in cement, ready-mix, and aggregates, with Cemex holding a controlling 75 percent interest.

Although the transactions in Spain and the Czech Republic do not meet the thresholds of the EC Merger Regulation, the EC has accepted a request from Spain to assess the portions of the deal impacting that country. The Czech competition authority is examining the potential effects of the transaction on competition in the Czech Republic.

With respect to the Cemex West transaction, the EC’s initial market investigation indicated that the deal might substantially lessen competition in parts of Germany and Belgium where Holcim and Cemex West compete or are well placed to compete. The EC is concerned that the transaction could enable cement producers active in Germany and Belgium to coordinate their market behavior, or facilitate such coordination.

The EC noted the specific characteristics of the cement industry in making its decision. There is high market concentration in Germany and Belgium, as well as high entry costs. Moreover, Holcim and Cemex West appear to be the main German suppliers of granulated blast furnace slag (GBS), a by-product of steel production that is used as a substitute for clinker for the production of cement and as a substitute for cement for the production of concrete, it was noted.

The EC has until March 10, 2014, to decide whether to block the deal.

News: Antitrust