ACCC to oppose Boral takeover

ACCC to oppose Boral takeover
Published: 12 May 2004

The Australian Competition and Consumer Commission would oppose the proposed acquisition by Boral Ltd of Adelaide Brighton Ltd, ACCC chairman Mr Graeme Samuel said today.  "The ACCC has sought an undertaking from Boral that it will not proceed with the acquisition," Mr Samuel said.  "If the undertaking is not given we will take appropriate action in the Federal Court.

"The ACCC’s investigation found that the proposed acquisition is likely to have significant detrimental effects on competition in downstream markets, including pre-mixed concrete and concrete masonry in a number of geographical areas," he said.  "Market inquiries were wide-ranging and extensive, and conducted with a large number of market participants."

A major concern of the ACCC with the takeover was that it would remove a significant source of cement supply which was predominantly independent of the major players, Boral, Readymix (CSR) and Pioneer (Hanson), and their suppliers, Blue Circle Southern Cement and Cement Australia.

The existence of Adelaide Brighton, in conjunction with its 50 per cent owned distribution arm, ICL Ltd, had proved to be a significant competitive element in the cement and concrete industries.  The acquisition of Adelaide Brighton by Boral would restrict this independence and substantially alter the competitive landscape.  The ACCC considered the likely effect of imports as a constraint on the remaining cement producers.

Market inquiries indicated that for a number of reasons, there were significant barriers to entry to sustained and significant importation of cement.  This meant that imports were not likely to act as a competitive constraint on the remaining Australian cement producers. In addition to the increased concentration that this merger would bring about in cement, there would be a similar effect in pre-mixed concrete in Sydney and Melbourne; concrete masonry in Sydney, Melbourne, and Adelaide; and flyash in NSW and South Australia.

Taking all of these factors into account, the ACCC considered that the proposed merger would be likely to result in a substantial lessening of competition, in contravention of the Trade Practices Act.