European regulator launches probe into Cemex-Holcim German deal

The European antitrust regulator has launched an in-depth investigation to find out whether the proposed acquisition of Mexico's Cemex' operations in Germany by Switzerland-based cement giant Holcim will reduce competition in certain parts of Europe.

In August, Holcim agreed to acquire part of Cemex' German subsidiary Cemex West, which has operations in cement, ready-mix concrete, aggregates and cementitious materials in western Germany together with a small number of plants and sites located in France and the Netherlands.

In exchange for these assets, Cemex will acquire the whole of Holcim's activities in cement, ready-mix concrete and aggregates in the Czech Republic and Spain.

The European Commission (EC) said that its 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.

The EC is concerned that the transaction could allow cement producers in Germany and Belgium to coordinate their market behaviour, or facilitate such coordination.

The EC's assessment takes account of the specific characteristics of the cement industry, such as the high concentration of the market in Germany and Belgium, high entry costs, the importance of commercial and structural links between firms, the level of transparency of cement prices and output and the past operation of cartels by cement companies in Belgium and Germany.

Moreover, the EC investigation showed that Holcim and Cemex West are the main German suppliers of granulated blast furnace slag (GBS), a by-product of steel production that is used as a substitute to clinker for the production of cement and as a substitute to cement for the production of concrete.

The Commission's initial market investigation revealed that the strong market position of Holcim and Cemex West could enable the merged entity to raise GBS prices in the absence of competition.

The Brussels-based regulator said that it will now investigate the proposed acquisition in-depth to determine whether its initial concerns are confirmed or not.