On 5 April 2017 the European Commission announced that it has prohibited the proposed joint acquisition of Cemex Croatia by HeidelbergCement and Schwenk. The two German cement companies had plans to acquire Cemex Croatia (a subsidiary of the Cemex Group) through their joint venture, Duna Dráva Cement (DDC).
The Commission found that the transaction raised serious competition concerns in relation to the Croatian markets for grey cement. Cemex is the largest cement producer in Croatia, whilst DDC and HeidelbergCement are the two largest importers of cement into Croatia. Had the takeover been approved, the parties’ combined market shares would have been around 45-50 per cent, reaching over 70 per cent in certain regions of the country. Furthermore, the Commission determined that each cement plant had a catchment area of a radius of only around 250 kilometres and therefore few cement manufacturers would have been able to compete with the merged entity.4
The Commission concluded that the takeover would have significantly reduced competition on the Croatian markets for grey cement and that there was “clear evidence” that this would have led to increased prices. Rather than offering to divest an existing cement business, the parties proposed to grant access to a cement terminal in southern Croatia currently leased by Cemex. The Commission decided that this would not have been sufficient to allow a supplier to “compete effectively and on a lasting basis” with the merged company. In particular, (i) the proposed remedies offered only access to a storage facility without existing customers, brands, sales staff or established access to cement; (ii) a competitor leasing the terminal would have high transport costs to reach customers; and (iii) the remedies were insufficient in scale as the terminal’s capacity is limited.
This is the second merger to be blocked by the Commission in the space of a few days. The Commission prohibited the merger between the London Stock Exchange and Deutsche Börse on 29 March 2017.
HeidelbergCement and Schwenk are challenging the Commission’s jurisdiction in this case at the General Court.5 As part of the same transaction, the parties also plan to acquire Cemex Hungary. The Commission referred the analysis of the potential effects in Hungary to the national competition authority. The Commission notes that the Croatian authority did not request the referral of the relevant aspects of the transaction.