Europe / Middle East / Africa
UK orders Anglo-Lafarge venture to sell assets
May, 04 2012
(UK) -- Miner Anglo American and cement maker Lafarge must sell major assets to win the British regulator’s clearance for a planned tie-up of their building materials businesses, a move the watchdog hopes could bring new players to the market.
The Competition Commission ruled in February that the joint venture, agreed last year, could damage competition in certain markets for construction materials, pointing to potential forced divestments.
On Tuesday it said the two companies had to sell an “extensive package of operations,” including one of the UK’s largest cement
plants. Both welcomed the decision, saying they were confident the conditions would be met.
That prompted analysts to speculate buyers for the assets may be lined up, despite the government’s austerity plans that are likely to limit spending on infrastructure.
Global miner Anglo American said the strategic rationale for the venture remained clear. Anglo, refocusing on core mining activities, struggled for more than three years to find a buyer for its Tarmac UK unit before agreeing last year to a joint venture with France-based Lafarge’s British cement, aggregates, concrete and asphalt businesses.
The Competition Commission began looking into the proposed venture, which would have rung up annual sales worth £1.8 billion ($2.9 billion) in 2010, after the tie-up was challenged by the Office of Fair Trading in September.
The assets that the two companies have to sell include a cement plant, quarry and linked rail depot in northern England, a network of ready-mix concrete plants representing over half the proposed venture’s capacity, six aggregate quarries and two asphalt plants, the Commission said.
Lafarge’s Hope cement plant in northern England is one of the largest in Britain and regulators hope its sale will bring in a new player to maintain the current level of competition. The UK cement market is currently dominated by Lafarge, Tarmac, Cemex and HeidelbergCement’s Hanson.
The sale of the Hope plant was proposed by Anglo and Lafarge.
Analysts have pointed to Swiss-based Holcim, which has aggregates and ready-mix in the UK but no cement, as a potential buyer for the cement assets.
AIM-listed Breedon Aggregates, run by construction industry veterans and now the largest independent operator in the UK aggregates, could also be a buyer for some of the assets.
“They would be right at the front of the queue for buying aggregates and ready-mix assets,” building materials analyst Charlie Campbell at Liberum said.
Breedon and Holcim could not immediately be reached for comment.
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