Federal Antimonopoly Service and Eurocement

Federal Antimonopoly Service and Eurocement
Published: 08 April 2005

The Federal Antimonopoly Service (FAS) did not hinder the deal for acquisition of cement assets of Inteco by Eurocement Group. The FAS approved this acquisition and did not set any behavior conditions for Eurocement Group.  Eurocement Group controls cement plants in six regions with the aggregate output of 11.3 million tons of cement per year (according to company’s data for 2004). The group is controlled by Filaret Galchev and his partners. After the deal with Inteco Eurocement will acquire controlling stakes in six cement plants in Russia and one cement plant in Ukraine, as well as minority stakes in Zhigulevskie Construction Materials and Ulianovskcement. 

The PR service of the FAS reported that the antimonopoly service approved acquisition of cement plants of Inteco by Eurocement Group. The companies announced the deal on March 31. The FAS received an application on acquisition of cement business of Inteco from Eurocement Group back in February. A source in the PR service of the FAS pointed out that the antimonopoly service had no grounds to decline approval of the deal because "the share of Eurocement Group on the federal market does not exceed 36 per cent." The FAS did not set behavior conditions for Eurocement. 

Eurocement Group is content with the verdict of the FAS. Press secretary of the company Sergei Meshcheryakov comments, "We are not a monopoly. In the European part of Russia there are enough companies that compete against us." Oleg Soloshchansky, Vice President of Inteco for construction and construction materials industry, is also convinced that even together with the new assets Eurocement Group cannot become a monopoly. Soloshchansky explains, "There are no obstacles for cement manufacturers for supply of their products to any region, which is a mandatory condition of competition." 

Meshcheryakov points out that acquisition of new plants is a part of the corporate strategy aimed at creation of a powerful cement holding being competitive on an international level. Meshcheryakov cannot say if his group will continue buying up of cement assets. 

Competitors of Eurocement took appearance of the sole leader on the market in different ways. A top manager of SU-155 group (owner of controlling stakes in Ulianovsk cement and Zhigulevskie Construction Materials) is convinced that Eurocement Group will be unable to monopolize the market and dictate prices to consumers. The top manager of SU-155 presumes that the antimonopoly agency will watch changing of cement prices and "if Eurocement breaks the rules of the game there will be someone to correct the company." 

Vice President of Aton Alexander Agibalov believes that this deal will be able to result in growth of cement prices. He points out that local manufacturers dominate in the provinces. Agibalov believes that only the market of the Moscow Region is relatively competitive. 

Alexei Shepel, CEO of construction corporation S-Holding, does not rule out that Eurocement Group may try to use its position to increase prices. Another manager of a construction company says that if cement prices grow developers will have to raise housing prices. 

A source in Novoroscement reports that after acquisition of assets of Inteco Eurocement Group will be able to become a monopoly in the European part of Russia, "Not a single investor stops at the output it has and invests in further increase of capacity. Bearing in mind the speed of cement production increase it is possible to say that in a year or two Eurocement Group may occupy up to 60 per cent of the market. In this case competitors and developers will have to adjust their actions to Eurocement or the antimonopoly service will interfere."