Saturday, April 07, 2007

U.S. Conditions Cement Company Acquisition on Divestitures

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

Mexico-based Cemex S.A.B. de C.V. would be required to divest 39 ready-mix concrete, concrete block, and aggregate facilities in Arizona and Florida in the event it succeeds in its hostile takeover of Australia-based Rinker Group, the Department of Justice Antitrust Division has announced.

Last October, Cemex, the largest U.S. supplier of ready mix concrete and cement and the seventh largest U.S. supplier of aggregate, announced its intention to acquire Rinker, the second largest U.S. supplier of ready mix concrete and the fifth largest U.S. supplier of aggregate—through a hostile cashtender offer.

The offer was due to expire on March 30, 2007, but Cemex extended it until April 27, 2007. The Cemex/Rinker transaction is valued at approximately $12 billion, including Rinker's debt.

Civil Suit and Proposed Consent Decree

The Antitrust Division filed a civil antitrust lawsuit in the federal district court in Washington, D.C. to block the proposed transaction. At the same time, it filed a proposed consent decree that, if approved by the court,would resolve the lawsuit and the Justice Department's competitive concerns.

Under the terms of the proposed consent decree, once Cemex obtains control of Rinker, Cemex must divest certain ready mix concrete assets to a single buyer in each of the areas of competitive concern.

The terms of the proposed consent decree also require the divestiture of all of Rinker's concrete block-related assets in the Tampa/St. Petersburg and Fort Myers/Naples areas. Cemex must divest two aggregate plants in the Tucson, Ariz., area to the same acquirer that purchases the two ready mix plants to be divested at the same locations.

Competitive Effects

The Justice Department said that without the divestitures the proposed acquisition would substantially lessen competition for ready mix concrete in certain metropolitan areas in Arizona and Florida, as well as result in increased prices for ready mix concrete, concrete block, and aggregate sold to customers handling state Department of Transportation and large building projects.

Without the divestitures required by the Justice Department, purchasers of ready mix concrete, concrete block and aggregate in these areas of Florida and Arizona, including state departments of transportation, would likely have faced higher prices if the transaction is completed said Thomas O. Barnett, Assistant Attorney General for the Department's Antitrust Division.

The Justice Department's action will ensure that these customers will continue to receive the benefits of competition.

The action is Cemex S.A.B. de C.V., U.S. No. 4864, CCH Trade Regulation Reporter ¶45,107 and ¶50,941. Text of the April 4 complaint and proposed final judgment appear on the Department of Justice Antitrust Division's web site.

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