Building materials firm Breedon Aggregates said yesterday it faces the prospect of having to offload a number of concrete plants to satisfy the UK’s anti-monopoly watchdog after agreeing to buy a rival for £336million.
Breedon’s takeover of Hope Construction Materials would add some 160 operational sites to its already huge portfolio of UK assets – and see it makes its bow on the cement market for the first time.
The enlarged group would have combined revenues approaching the £600million mark, going on their incomes for the year ended June 30, 2015.
And while most of the two companies’ operations do not overlap, the Competition and Markets Authority (CMA) is likely to compel Breedon to sell off some concrete plants to make room for competitors and protect customer interests.
Breedon already has 59 concrete plants in the UK, but that number will rise to 211 once the takeover goes through.
It would be the second time the CMA has intervened in the wake of a Breedon takeover in recent times.
Last year, the Derby-based firm was ordered to sell one of two asphalt plants near Aberdeen in the wake of its £34million acquisition of Aggregate Industries UK’s Scottish assets.
Breedon, which is supplying materials for the Aberdeen city bypass and the A9 dualling between Perth and Inverness, eventually opted to offload its plant at Tom’s Forest in Kintore.
Breedon chief executive Simon Vivian said: “We do not produce cement, they (Hope) do not produce asphalt. Also, their quarries do not overlap with ours.
“But there is some overlap with concrete. We are likely to have to sell some UK concrete plants.”
He said Breedon has already touched base with the CMA and will submit a merger notice with the authority in the coming weeks, after which it will find out how many UK concrete plants it will have to sell, as well as their locations.
Breedon expects the deal to be tied up with Hope’s owner, Luxembourg-based Cortolina Investments, by the second quarter of 2016.
Hope, which was founded in 2013 following the divestment of assets from Lafarge and Tarmac, has 12 concrete plants in Scotland – one is near Inverness, and another is near Elgin.
It employs 930 people in the UK, with between 20 and 30 north of the border.
Breedon’s Dundee-headquartered Scottish business employs about 700 people and operates 38 quarries, 17 asphalt plants, 36 ready-mixed concrete plants and two concrete block plants.
Mr Vivian said Hope’s cement division will continue to trade under the Hope brand name, but that the rest of the business will carry the Breedon name.
The transaction consists of a £202million cash consideration – funded by a new revolving credit facility and an equity placing – and a £134million share consideration.
Following the acquisition, Abicad, an associated company of Cortolina, will hold an 18.4% stake in Breedon.
Furthermore, Hope’s current chairman, Amit Bhatia, will become a non-executive director to Breedon’s board.
Mr Bhatia, vice chairman of Queens Park Rangers FC, is the son-in-law of steel magnate Lakshmi Mittal, who is one of the UK’s richest men.
Breedon shares were up 7% to 64p on the London exchange as of mid-afternoon yesterday.