The government鈥檚 mergers watchdog has asked for assurances that a 拢178 million aggregates company buy-out won鈥檛 dilute competition in the sector.
The Competition and Markets Authority has been looking into construction materials giant Breedon Group鈥檚 plans to buy a big part of the Cemex 海角视频 group.
It has now given both sides five days to address its concerns, otherwise the merger will be referred for an in-depth investigation.
North Leicestershire based building materials company Breedon has already agreed to deal to acquire 100 鈥渜uality assets鈥 from Rugby-based Cemex 海角视频, underpinned by approximately 170 million tonnes of mineral reserves and resources.
Following the acquisition Breedon would have more than 1 billion tonnes of mineral reserves and resources.
Up until now the newly acquired business has been ring-fenced and led by an independent management team 鈥 pending the CMA鈥檚 approval 鈥 operating from its own offices under the name Pinnacle Construction Materials.
The acquisition covers around 100 locations across six divisions in Scotland, Wales, North-East England, Norfolk, the East Midlands, and Yorkshire, which in the year to 2018, had revenues of 拢178 million.
It operates in areas including aggregates, asphalt, ready-mixed concrete, concrete products and cement, together with contracting services, and has 650 staff.
Breedon, which is based near East Midlands Airport in north Leicestershire, has previously said the acquisition was consistent with a strategy of acquiring businesses with 鈥渟trong potential for performance improvements and synergy benefits鈥.
The deal does not include two large cement production plants at Rugby, in Warwickshire and South Ferriby, North Lincolnshire. The latter has been overhauled following a devastating tidal surge in the River Humber in 2013, when a year鈥檚 production was lost.
The CMA said the acquisition raised competition concerns in the supply of building materials in some parts of the 海角视频. Both parties are among the leading producers and distributors of construction materials in the 海角视频 and Ireland.
It said all of the materials included in the deal are 鈥渆ssential components鈥 in the construction of roads, buildings and other infrastructure.
Its preliminary investigation found the deal raised competition concerns in relation to the supply of ready-mixed concrete, non-specialist aggregates and asphalt in 15 local markets across the 海角视频.
In each of those geographical areas the two businesses currently have a large presence and are in close competition 鈥 with limited competition from other suppliers.
The CMA has also fears other suppliers in the east of Scotland could be in a position to charge more following the changes if there is less rivalry on their patches.
The CMA said it was 鈥渢herefore concerned that the deal could result in a substantial lessening of competition, leading to higher prices and lower quality building materials for 海角视频 construction projects鈥.
CMA senior director Colin Raftery said: 鈥淭hese products are widely used in a range of building projects across the 海角视频, and account for a material part of the construction costs faced by businesses and public bodies.
鈥淎s the majority of these materials are sourced locally, it鈥檚 vital to ensure that enough competition will remain at the local level so there鈥檚 enough choice and prices remain fair.
鈥淲hile sufficient competition will remain in most areas, we are concerned that the deal could result in high prices and lower quality products in some areas where Breedon wouldn鈥檛 face sufficient competition.鈥
If the two sides can鈥檛 address the concerns within five working says it will go to an in-depth 鈥淧hase 2鈥 investigation.
Breedon saw revenues rise eight per cent in the first 10 months of 2019 at around 拢800 million.
However in the first half of 2020 revenues were down a quarter on the same period last year at 拢335.3 million.
The lockdown in the economy saw it record a pre-tax loss of 拢10 million in the last six months, compared to a profit of 拢30.5 million in the first half of 2019.
However, it said site reopenings started in early May and by June said revenues had recovered to 99 per cent of those in June 2019.
Breedon operates two cement plants as well as quarries, asphalt plants and ready-mixed concrete plants, and also has slate production, concrete and clay products manufacturing, contract surfacing and highway maintenance operations.
Breedon currently employs almost 3,000 people and has almost 900 million tonnes of mineral reserves and resources.
