EC to examine Holcim/CEMEX West merger

European Commission opens in-depth investigation into proposed acquisition of CEMEX West by Holcim

THE European Commission (EC) has opened an in-depth investigation to assess whether the planned acquisition of the German company CEMEX West by its Swiss rival Holcim is in line with the EU Merger Regulation.

The EC has concerns that the transaction may reduce competition in parts of Germany and Belgium where CEMEX West are an actual or potential competitor of Holcim.

CEMEX West comprise a number of operating entities which are subsidiaries of the Mexican-based CEMEX Group. Their 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.

Holcim intend to acquire part of CEMEX Group’s activities in cement, ready-mixed concrete, aggregates and cementitious materials in western Germany, together with a small number of plants and sites located in France and the Netherlands.

Following notification of the case on 3 September 2013, the EC’s initial market investigation indicated that the proposed transaction may substantially lessen competition in parts of Germany and Belgium where Holcim and CEMEX West compete or are well placed to compete.

In particular, the EC is concerned that the transaction could allow cement producers active in Germany and Belgium to co-ordinate their market behaviour, or facilitate such co-ordination.

It says the removal of a significant player such as CEMEX West could render such co-ordination more effective and sustainable, thus potentially removing incentives for competitors to expand in regions where Holcim are strong.

Moreover, Holcim and CEMEX West are the main German suppliers of granulated blast-furnace slag (gbs), which is used as a substitute to clinker for the production of cement and as a substitute to cement for the production of concrete.

The EC’s initial market investigation revealed that the strong market position of Holcim and CEMEX West could allow the merged entity to raise gbs prices in the absence of a sufficient competitive constraint from the remaining players.

The Commission, which is now investigating the proposed acquisition in depth to determine whether its initial concerns are confirmed or not, has until 10 March 2014 to reach a decision.

The Holcim/CEMEX West transaction is also linked to another transaction whereby CEMEX will acquire control of the whole of Holcim’s activities in cement, ready-mixed concrete and aggregates in Spain and the Czech Republic.

This second transaction does not meet the turnover thresholds of the EU Merger Regulation and was, therefore, notified to the Spanish and Czech competition authorities respectively. However, following a request from Spain under Article 22 of the Merger Regulation, the EC will assess the part of the transaction related to Spain.

The Czech competition authority has elected not to join the Spanish request and is continuing its own examination of the potential effects of the second transaction on competition in the Czech Republic.