DOC - Europa

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IP/01/574

Brussels, 18 April 2001

Commission launches in-depth investigation into acquisition of Addtek by CRH in the construction sector

The European Commission has today decided to open an in-depth investigation into the planned acquisition by Ireland’s CRH Plc of Finnishbased Addtek International Oy Ab. At this stage, the Commission has concerns that the deal could significantly reduce competition and, therefore, translate in higher prices in a number of products, mainly in precast concrete floors in Finland and in the Netherlands.

CRH is an international group based in Ireland which produces and distributes building materials (such as cement, aggregates and ready-mixed concrete), as well as precast concrete products for the construction sector (such as precast concrete floors, walls and building structures). CRH is present in the Finnish building materials market via two subsidiaries: Finnsementti Oy, which produces grey cement, and Lohja Rudus Oy, which is active in aggregates and ready-mixed concrete. CRH is also active in the Dutch construction flooring market via its subsidiary Dycore B.V.

Addtek is the largest manufacturer of precast concrete products in Europe. In precast concrete, the biggest product group is prestressed hollow-core floor elements, followed by beams, columns and walls. Precast concrete is also used in infrastructure works including railway sleepers and structures for bridges and tunnels. Addtek is active in the Finnish market of precast concrete products via

Parma Betonila Oy, which it controls jointly with the Heidelberger group. Addtek is also active in the Dutch construction flooring market via its subsidiaries Verenigde

Bouwproducten Industrie B.V. (VBI) and Spanbeton B.V.

In the Netherlands, CRH’s and Addtek’s activities overlap in precast concrete floors. In Finland, a vertical relation arises between CRH’s activities in building materials (grey cement, aggregates and readymixed concrete) and Addtek’s activities in precast concrete elements.

The Commission’s initial one-month investigation indicated that precast concrete floors and other elements, such as structures, walls and railway sleepers, are a distinct product market from other materials, such as cellular concrete, steel and wood. The review further suggested that floors and other elements cast

in situ

(that is, cast on the building site itself using ready-mixed concrete) are not a substitute for precast concrete elements. In this respect, the investigation shows that precast concrete elements have specific advantages in terms of building site logistics, as they allow for a speedy construction process at the building site. Casting

in situ

takes longer because on-site construction work (such as timbering and support structures) is required and concrete may take weeks to dry. Casting

in situ

is also more labour intensive than constructing with precast elements.

In the Netherlands, the combined market position of CRH and Addtek in precast concrete floors would appear to give rise to competition concerns, especially as their closest competitors are significantly smaller than the resulting merged entity.

This is particularly the case for hollow-core floor elements.

In Finland, CRH is the only producer of grey cement via its subsidiary Finnsementti

Oy. Addtek’s Parma Betonila Oy, on the other hand, has a very high market share in precast concrete floors and is by far the largest producer of precast concrete structures, both big users of grey cement. Following the operation, the new entity would largely control the grey cement supplies in Finland while at the same time have a very strong position in precast concrete floors and structures. The

Commission considers, at this stage, that it is necessary to thoroughly investigate whether CRH has the incentive and the means to place its downstream competitors in the domain of precast concrete floors and structures at a competitive disadvantage, for example by playing on the supply conditions of grey cement to these competitors, thus creating problems in their production process, or by crosssubsidizing its own downstream subsidiary. Based on the information currently available, the Commission considers that imports, which originate mainly from

Russia and the Baltic States, are not a full substitute to Finnsementti’s grey cement to CRH’s downstream precast concrete competitors, due to the problems related to quality and supply security.

Therefore, the Commission considers that the operation raises serious competition concerns in the market for precast concrete floors in the Netherlands, the markets for precast concrete floors and precast concrete structures in Finland and as regards CRH’s position in grey cement in Finland.

A large number of customers and competitors have expressed serious concern over the notified operation. Negative competition effects are expected especially by small and medium sized competitors.

According to the European Union’s merger regulation, the Commission has now a maximum of four months to conduct a further investigation and reach a final decision. The opening of an in-depth review does not prejudge the final outcome of the case and respects the rights of the merging and other interested parties to be heard.

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