EC prohibits HeidelbergCement and Schwenk's takeover of Cemex Croatia
Staff Writer |
The European Commission has prohibited the proposed takeover of Cemex Croatia by HeidelbergCement and Schwenk under the EU Merger Regulation.
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The Commission had strong concerns that the takeover would have significantly reduced competition in grey cement markets and increased prices in Croatia.
This decision follows an in-depth investigation by the Commission of the proposed deal. Through the deal HeidelbergCement and Schwenk, two German cement companies, would acquire Cemex's assets in Croatia via their joint venture company Duna Dráva Cement (DDC).
The Commission's investigation analysed competition between the parties in the Croatian cement markets.
Like most construction materials, such as aggregates and ready-mix concrete, cement is sold within a relatively short distance from the site where it is manufactured.
Because of high transport costs and security of supply issues, cement plants will not be competitive if they are located too far away from customers. In this specific case, the investigation found that each cement plant had a catchment area of about 250 kilometres around it.
Cemex Croatia is currently the largest cement producer in the country, operating three profitable and valuable plants in southern Croatia, near Split.
DDC and HeidelbergCement are the largest cement importers in Croatia. DDC imports grey cement into Croatia from its plants in Hungary and Bosnia-Herzegovina (the closest competing plant to Cemex's plants in Split). HeidelbergCement imports grey cement into Croatia from a plant in Italy.
The Commission investigated the overlaps in the Croatian cement markets between, on the one hand, Cemex Croatia and, on the other hand, HeidelbergCement and DDC.
The Commission had serious concerns that the takeover would have reduced competition in the Croatian markets for grey cement currently served by Cemex's cement plants in Split. This would have led to higher prices for cement customers.
The takeover would have eliminated competition between companies that were competing head-to-head for the business of Croatian cement customers and could have led to a dominant position in the markets.
The combined market shares of the parties would have been around 45-50% in the markets and reached more than 70% in parts of the country (notably in Dalmatia).
The Commission's investigation also found that DDC had been pursuing a strategy to increase sales in Croatia, resulting in more competitive prices for Croatian customers in recent years.
The takeover would have eliminated this competition. Furthermore, the Commission found specific evidence forecasting appreciable cement price increases after the deal.
The Commission's assessment revealed that remaining domestic cement suppliers and importers would not have been able to compete effectively with the merged company after the takeover.
This is because other suppliers have limited potential for sales expansion and are located further away, facing higher transport costs to reach customers in the relevant markets.
Furthermore, there are no independent terminals available on the Croatian coast for seaborne imports.
Finally, the merged entity would have had the possibility to make market entry by competitors difficult and costly. ■
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