26th Apr 2016 10:25
LONDON (Alliance News) - Breedon Aggregates Ltd on Tuesday said trading in the first three months of 2016 has been in line with expectations, despite a slow start in Scotland, as it welcomed the UK Competition & Markets Authority's announcement that it will consider whether to accept the undertakings Breedon has offered instead of carrying out an in-depth merger investigation into its proposed acquisition of Hope Construction Materials Ltd.
Breedon entered into a deal with Cortolina Investments Sarl to buy Hope in November for GBP336.0 million in cash and shares. Breedon said the deal will create the largest independent building materials company in the UK.
Earlier this month, however, the CMA said the proposed acquisition could face being referred for an in-depth investigation, unless Breedon was able to address its competition concerns that the two are "major competitors in RMX", the ready-mixed concrete market, and that the merger could result in higher prices for customers.
This came after the CMA completed a phase 1 review of the merger of the two construction companies, which both produce and supply aggregates and the ready-mixed concrete RMX.
On Tuesday, the CMA said it has received proposed undertaking from Breedon to divest of 14 ready-mixed concrete sites to an up front buyer approved by the authority.
"CMA has decided that there are reasonable grounds for believing that the undertakings offered by Breedon, or a modified version of them, might be accepted by the CMA," the authority said in a statement.
The authority added that it has until June 23 to consider whether to accept the undertakings, or a modified version of them, although it said it may decide to extend this deadline to August 25 if it considers there are special reasons for doing so.
As part of this consideration process, the CMA will undertake a public consultation on whether the proposed undertakings are sufficient to address the competition concerns.
"If the undertakings are not accepted, the acquisition will be referred for a phase 2 merger investigation," the authority said.
"The company fully expects to be able to finalise the required undertakings to the CMA's satisfaction and complete the required divestments in the near future, paving the way for completion of the acquisition later this summer," said Breedon on Tuesday.
Elsewhere, in a statement to be made at Breedon's annual general meeting on Tuesday, Chairman Peter Tom said trading for Breedon met expectations in the first quarter, despite a slow start in Scotland.
Breedon's major capital investment has continued with a new GBP3.0 million asphalt plant at Tom's Forest quarry in Scotland under construction and due to be commissioned shortly.
"The outlook for our industry continues to be positive, with Office for National Statistics estimates suggesting a pick-up in construction activity since December 2015 and the MPA forecasting double-digit growth in volumes of all our key products over the next three years," Tom said.
"However, the timing and scale of some major projects are still likely to be subject to change and the forthcoming EU referendum may create uncertainties in the short term. Against this backdrop, we remain confident of delivering a performance in line with market expectations for 2016," Tom added.
Shares in Breedon were down 0.2% at 74.75 pence on Tuesday.
By Hannah Boland; [email protected]; @Hannaheboland
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