The joint venture that is going to involve Lafarge and Anglo-American is estimated to be worth nearly £2 billion, and it might be blocked by the Competition Commission.
The Commission have said that the merger might mean that the companies can work together to rig prices and they are currently deciding whether they should block the joint venture from going ahead.
The cement market in the UK is already dominated by only four companies and the Commission have said they are concerned that increased consolidation would mean an increase in prices and that the companies would be able to squeeze suppliers even more. The Commission have said that there is no evidence of collusion taking place just yet but they are concerned that it could happen in the future.
A representative from the Competition Commission, Roger Witcomb, has recently commented, “We’re not sure if there is any coordination going on in the market right now but this joint venture would certainly increase the possibility of that happening.”
Despite the findings by the Commission, market analysts have said that it is likely the merger will continue at least on some scale. Lieberman Capital have commented, “This is certainly a setback for the joint-venture but it is unlikely to be the end of the company’s plans. It is likely that steps will be taken to appease the commission and that the situation will be remedied.”
The merger will bring the companies together and it is expected that they will be able to save £60 million a year by operating as a single company. Currently, operating as individual companies, Anglo-American and Lafarge are only joined in the market by Heidelberg and Cemex. Together ,these four companies are responsible for sharing 90 percent of the cement market in the UK.
The downturn in the economy has meant companies are looking for ways to reduce their costs and it is expected that this is what has motivated the merger. The Commission is going to be accepting comments until 13 March and remedies until the sixth of the month. Share prices in the companies have been fluctuating with the news.