Concerns over competition have been raised over Breedon Group’s £178 million purchase in January of approximately 100 CEMEX sites across the UK.
The Competition and Markets Authority (CMA) has given both companies five days in which address issues relating to the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets.
Breedon Southern Limited owns the assets but they are currently operated separately as ring-fenced Pinnacle Construction Materials, and include 49 ready-mix plants, 28 aggregate quarries, four depots, one cement terminal, 14 asphalt plants and four concrete products operations.
Pinnacle has more than 600 employees and 170 million tonnes of mineral reserves and resources.
The CMA’s 1st Phase Investigation found that both companies currently have a large presence and compete closely, with limited competition from other suppliers in the identified local markets
The merger could make it easier for cement suppliers in the East of Scotland to align their behaviour, without agreement or direct communication, in a way that limits competition.
“The CMA found that this could result in cement suppliers competing less strongly for certain customers in the region,” stated the CMA’s report.
“The CMA is therefore concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for UK construction projects.”
If Breedon and Cemex are unable to address the CMA’s concerns within five working days, the deal will be referred for an in-depth Phase 2 investigation.
“These products are widely used in a range of building projects across the UK, and account for a material part of the construction costs faced by businesses and public bodies,” said CMA senior director, Colin Raftery.
“As the majority of these materials are sourced locally, it’s vital to ensure that enough competition will remain at the local level so there’s enough choice and prices remain fair.
“While sufficient competition will remain in most areas, we are concerned that the deal could result in high prices and lower quality products in some areas where Breedon wouldn’t face sufficient competition.”
AIM-listed Breedon, whose headquarters are in Leicestershire, has nearly 900 million tonnes of mineral reserves and resources and operates in 300 sites in the UK and Ireland.
The company has nearly 3,000 employees and its turnover in December 2018 was £862 million.
It produces cement, aggregates, asphalt, ready-mixed concrete, Welsh slate and specialist concrete and clay products.
Mexican-owned CEMEX is the world’s second largest building materials company focused on cement, ready-mix concrete and aggregates in more than 50 countries.
It has more than 40,000 employees worldwide and a turnover of around $15bn (£11.4bn).