Breedon bosses unconcerned by competition watchdog’s attention
CONSTRUCTION materials giant Breedon brushed off an announcement that the UK’S competition watchdog has taken preliminary steps to investigate its £155 million acquisitions of assets from Mexican rival, Cemex.
The Competition and Markets Authority (CMA) imposed an initial enforcement order (IEO) on the transaction, unveiled earlier in the month. The IOE prevents the companies from taking action – including merging or integrating any parts of their businesses – ahead of the outcome of a competition investigation. The CMA did not disclose when any enquiry into the merger might begin.
Breedon, the UK’S largest independent construction materials firm, confirmed the CMA action would not delay completion of the acquisition, which it still expects to take place in the second quarter of the year. In a statement to the stock market, the company said the CMA’S move was “as expected” and that it was “actively working with the CMA to ensure full compliance with the order”.
The deal will see Breedon acquire more than 100 active operations across Scotland, Wales, North-east England, Norfolk, the East Midlands, and Yorkshire. It takes in 17 sites in Scotland, including ready-mix concrete facilities at Clyde Tunnel, Cumbernauld, East Kilbride, Grangemouth, Mossend, Polmadie, and Stirling, as well as a cement terminal on Leith Docks.
Pat Ward, Breedon’s chief executive, described the deal as a “unique opportunity” to increase its footprint in six key regions where the firm is “currently underrepresented”, including the central belt.
Breedon said the deal would add 170 million tonnes of mineral reserves to its resources and deliver £2m worth of cost synergies over the next three years. Following the acquisition of the Cemex assets, the group will employ more than 3,600 people and will have more than one billion tonnes of mineral reserves and resources.
In a pitch to investors, Breedon said the deal would enable it to target the UK government’s £24.7 billion infrastructure investment, the “highest on record” even before any Budget spending increases.
After completion of the divestiture, Cemex said it will still retain a “substantial” business in the UK including cement production, ready-mix concrete, aggregates, asphalt, and paving services. It added it will use the proceeds of the deal to reduce debt.
Breedon is no stranger to CMA investigations. The CMA required remedies from Tarmac when Breedon swapped 23 of its ready-mixed concrete plants and a payment to Tarmac of £6.1m in cash for an asphalt plant and three quarries including one near Inverness.
The company forged its status as the UK’S largest independent construction materials firm when it took on Hope Construction materials in a deal worth £336m in 2016. The CMA told Breedon to sell 14 ready-mix concrete sites to complete the deal. Hope in turn had been formed in 2013 when Indian steel magnate Lakshmi Mittal acquired assets sold off in the wake of the mega merger of Lafarge and Tarmac – another deal ruled on by CMA.
The firm, headquartered in Breedon on the Hill, Leicestershire, was formed in 2010. Peter Tom, a former lock forward and current chairman of rugby union side Leicester Tigers, launched the business by acquiring assets from Ennstone along with former Mowlem and Hanson boss Simon Vivian. Mr Tom retired as executive chairman last year.
He was replaced in the role by Amit Bhatia, the 40-year-old chairman of football club Queens Park Rangers and son-in-law of Mittal.
The company’s Scottish headquarters is based in Ethiebeaton near Dundee.
Last year Breedon won a supply and surfacing deal from Balfour Beatty on a 9.5km stretch of road on the A9 between Luncarty and Pass of Birnam as part of Transport Scotland’s £3billion upgrade programme. Previously, in a joint venture with Northern Irish quarry firm Whitemountain, the company secured a £55m deal to supply and lay more than 500,000 tonnes of asphalt on the £745m Aberdeen Western Peripheral Route (AWPR). Breedon subsequently acquired Whitemountain owner Lagan Group in 2018 for £455m to become a £1bn+ business. Breedon also owns a stake in road maintenance firm. Bear Scotland, along with Eurovia and Jacobs.
Shares in Aim-listed Breedon closed 4% higher to 93p.
We are actively working with the CMA to ensure full compliance with the order