Reuters: Regulatory News: UPDATE 3-UK orders Anglo-Lafarge venture to sell assets

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UPDATE 3-UK orders Anglo-Lafarge venture to sell assets May 1st 2012, 15:54 Tue May 1, 2012 11:54am EDT * Commission had ruled that JV could damage competition * Demands enough sales to pave way for new competitors * Swiss-based Holcim, UK's Breedon seen as potential buyers By Clara Ferreira-Marques LONDON, May 1 (Reuters) - Miner Anglo American and cement maker Lafarge must sell major assets to win British clearance for a tie-up of their building materials businesses, a move the regulator hopes could bring new players into the market. Britain's Competition Commission ruled in February that the planned joint venture, agreed last year, could damage competition in certain markets for construction materials. Analysts at the time assumed that forced divestments would be required to address those concerns. On Tuesday the Commission said the two companies had to sell an "extensive package of operations", including one of the UK's largest cement plants. Both companies said they were confident the conditions would be met, prompting speculation that they might have buyers for the assets lined up, despite government 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 pounds ($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 UK's largest independent operator in 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 said in a statement it had indicated its interest in assets that could be sold as a result of the antitrust move, and would assess opportunities once more detail was available. Holcim could not be reached for comment. AUSTERITY DEAL The assets, however, are likely to be less attractive to foreign players who do not already have a UK presence, as the country enters n period of austerity likely to substantially rein in major infrastructure and public works projects, which account for roughly half of demand for cement and aggregates. "If half of demand is under quite serious pressure, life is not going to be much fun ... It is not an obviously exciting time to get involved," Campbell said. "Lafarge and Tarmac, or Anglo, are doing what they are doing because they want out ... Ultimately, both of them would want to sell down their stake." Details of how the assets will be sold and packaged will be finalised after the publication of the final report. "We believe that these extensive sales will help protect all customers' interests in these key markets, which is particularly important when one considers how much construction work is funded by the public purse," said Roger Witcomb, chairman of the Anglo/Lafarge Inquiry Group. Link this Share this Digg this Email Reprints

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