European regulator blocks HeidelbergCement, Schwenk takeover of Cemex Croatia

European antitrust regulators today blocked German cement producers HeidelbergCement and Schwenk's takeover of Cemex's Croatian unit saying that the merger would have significantly reduced competition in grey cement markets and increased prices in Croatia.

"We had clear evidence that this takeover would have led to price increases in Croatia, which could have adversely affected the construction sector. HeidelbergCement and Schwenk failed to offer appropriate remedies to address these concerns," European Commission (EC) commissioner Margrethe Vestager, said in a statement.

HeidelbergCement and Schwenk had in September 2016 offered to buy Cemex Croatia from Mexico's Cemex through their Hungarian joint venture Duna Drava Cement (DDC) in a deal worth about €250 million.

The EC referred the analysis of the deal's potential effects in Hungary to the Hungarian competition authority.

Cemex Croatia, a subsidiary of the Cemex Group, sells grey cement, ready-mix concrete, clinker and aggregates in Croatia and the Western Balkans and also supplies cement to Italy, Slovenia, Malta and other export markets.

Cemex Croatia operates three cement plants in Split and several cement terminals and ready-mix concrete plants in Croatia.

DDC and HeidelbergCement are the largest cement importers in Croatia. DDC imports grey cement into Croatia from its plants in Hungary and Bosnia-Herzegovina, while HeidelbergCement imports grey cement into Croatia from a plant in Italy.

The combined market shares of DDC and Cemex Croatia would have been around 45-50 per cent.

The EC said that the companies did not offer to divest an existing cement business, but instead proposed to grant its rivals access to a cement terminal in Metkovic in southern Croatia.

The terminal, a storage facility for cement located on the Neretva river, is currently leased by Cemex Croatia.

The EC had concerns that the proposed remedies would also have been insufficient in scale because the terminal's cement capacity was limited.

Moreover, due to the terminal's location, it is likely that the terminal's capacity would also have been used to sell to customers outside the Croatian markets that the EC was concerned about.