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Acquisition of Karsdorf cement plant by Schwenk abandoned

Date of issue: 16.11.2017

The company Schwenk KG (Ulm) has abandoned its plans to acquire a cement plant in Karsdorf (Saxony-Anhalt) from Opterra GmbH (Leipzig). Opterra GmbH is a subsidiary of the Irish building materials company CRH. The Bundeskartellamt had previously informed the companies that the planned acquisition raised competition concerns. The withdrawal of the notification also includes the acquisition of the cement plant in Sötenich (Eifel) which was unproblematic.

Andreas Mundt, President of the Bundeskartellamt: "The merger was expected to significantly impede effective competition and would have therefore had to be prohibited. With the acquisition of the plant in Karsdorf Schwenk would have gained a dominant position as a cement manufacturer in the Thuringia, Saxony-Anhalt and Saxony regions. In particular, the position of independent ready-mix concrete customers would have distinctly worsened as a result of the merger."

The regional market affected by the planned acquisition covers large areas of Saxony-Anhalt, Thuringia and Saxony as well as smaller bordering areas of Brandenburg, Hesse and Bavaria. In this market area the Karsdorf plant (Opterra) is currently the leading cement producer with market shares of approx. 40 per cent. Post merger Schwenk KG, which already has a cement plant in Bernburg (Saxony-Anhalt), would have achieved a market share of around 60 per cent. The authority's investigations showed that competition in the market area in question is already restricted.

With the acquisition Opterra, Schwenk's closest and most active competitor, would have been eliminated from the market. The parties' cement plants are situated only around 80 kms from one another. For many cement customers, alternative suppliers are further away, resulting in much higher transport costs.  The limited production capacities of the remaining competitors would have given Schwenk additional scope for raising prices. The Karsdorf cement plant has by far the largest capacity in the market area. Given the absence of its own ready-mix concrete plants, which buy a large share of the cement produced, Opterra had to actively solicit orders for cement, especially from independent ready-mix concrete companies. The merger would have eliminated this competitive pressure.

Moreover, due to the disappearance of an active competitor, the merger would have increased the possibilities for parallel and coordinated conduct among the remaining market players. The risk of collusion in the cement markets is already high. This was a key result of the Bundeskartellamt's "Sector inquiry into the cement and ready-mix concrete sector" concluded this summer (see Website of the Bundeskartellamt). Cement markets are stable markets for mature and homogeneous products where competitive moves by suppliers offering innovative products are rare. There are also high barriers to entry. There were therefore no new market entries or noteworthy import activities in the last ten years. The high transparency on the cement markets due to regular contact between the market players also has a dampening effect on competition 

To avoid a prohibition of the project Schwenk had offered a commitment to transfer 500 kt of Karsdorf's cement capacity and a customer base with an annual offtake of 450 kt cement to an independent third party (so-called plant slice). This proposal was market tested. Almost all the customers surveyed considered the plant slice option inadequate or inappropriate to compensate for the adverse impact on competition. They thought that the acquirer of the plant slice would be virtually dependent on Schwenk in the future and that the two companies would coordinate conduct between themselves. Many of the companies also pointed out the risks involved in a contractual arrangement. The Bundeskartellamt rejected the commitment proposal as unsuitable.

Press release (pdf)

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