Fin24

Anglo JV stunts competition - UK watchdog

2012-02-21 12:49

London - A joint venture between Anglo American [JSE:AGL] and cement maker Lafarge would damage competition in the British market for construction materials, the UK Competition Commission said, outlining potential remedies which could include forced sales.

While the watchdog could block the planned deal, the companies expressed confidence the regulator’s worries could be “remedied” and analysts said on Tuesday an outright prohibition was likely to be avoided through disposals.

Global miner Anglo American struggled for more than three years to find a buyer for its Tarmac UK unit as part of a broader effort to focus on core mining activities, before agreeing last year to a joint venture with 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 £1.8bn in 2010, after the proposed tie-up was challenged by the Office of Fair Trading (OFT) in September.

The OFT said the venture would mean overlaps in a number of markets on a local, regional and national level, adding the deal might also affect the ability of suppliers to compete.

In a summary of its findings, the Competition Commission supported that view, saying the tie-up could lead to a substantial lessening of competition.

The commission said it was now consulting on possible actions it could take.

“Whilst this is a set back for the proposed tie-up, the CC has compiled a list of remedies therefore this is not a fatal block,” analysts at Liberum said in a note, adding disposals “should appease the regulator”.

Anglo American, which faced criticism for failing to sell the Tarmac business outright last year, said it would work with the regulator and continued to “believe in the strategic rationale of the transaction”.

Anglo bought Tarmac UK as part of the larger Tarmac group in 2000. In 2011, the unit contributed a $35m operating loss.

Lafarge said both companies felt “the concerns expressed in the Competition Commission’s provisional findings can be remedied and effective competition maintained in the sector”.

The commission will now publish a list of possible remedies by May, outlining the way that anti-competitive effects of the joint venture could be prevented.

It will accept comments from interested parties until March 6, and the companies involved can respond until March 13.