larfargeana

1 001 0112 Analysis of the Complaint and Proposed Consent Order to Aid Public Comment Lafarge S.A. and Blue Circle Industries PLC I. Introduction The Federal Trade Commission has accepted for public comment a Decision and Order (“Proposed Order”), pursuant to an Agreement Containing Consent Orders (“Consent Agreement”), against Lafarge S.A. and Blue Circle Industries PLC (collectively “Respondents”). The Proposed Order is intended to resolve anticompetitive effects in the cement and lime markets stemming from the proposed acquisition by Lafarge of Blue Circle (the “Acquisition”). As described below, the Proposed Order seeks to remedy anticompetitive effects of the Acquisition in cement and lime by requiring Respondents to divest certain assets relating to cement to Glens Falls Lehigh Cement Company; to divest certain other assets relating to cement to an acquirer approved by the Commission; and to divest certain assets relating to lime to an acquirer approved by the Commission. The Commission has also issued an Order to Hold Separate and Maintain Assets (“Hold Separate Order”) that, except with respect to the assets to be divested to Glens Falls, requires Respondents to preserve the businesses they are required to divest as viable, competitive, and ongoing operations until the divestitures are achieved. The Proposed Order, if finally issued by the Commission, would settle charges that the Acquisition may have substantially lessened competition in the markets for cement and lime. The Commission has reason to believe that the Acquisition would violate Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. The proposed complaint (“Complaint”), described below, relates to the basis for this belief. 2 II. The Merging Parties and the Acquisition Lafarge is a French corporation with global operations in the manufacture and sale of cement and other building materials. Based on 2000 production capacity, Lafarge is one of the top three cement manufacturers in North America. Lafarge also has an ownership interest in a joint venture with Carmeuse North America Group B.V. that manufactures and sells lime. Blue Circle is an English corporation with global operations in the manufacture and sale of cement and other building materials. Based on 2000 production capacity, Blue Circle is one of the top five cement manufacturers in North America. Blue Circle also participates in a joint venture with Chemical Lime Company that manufactures and sells lime (the "Lime JV"). On January 8, 2001, Lafarge and Blue Circle entered into an agreement in which Lafarge will pay Blue Circle shareholders approximately $3.8 billion in cash for the approximately 75% of Blue Circle’s outstanding voting stock that Lafarge does not already own. III. The Proposed Complaint According to the Complaint, the Acquisition will have anticompetitive effects in two relevant product markets: cement and lime. Cement is a construction raw material that users mix with water and aggregates to form concrete. Cement is made by combining calcium (normally from limestone), silicon, aluminum, iron and other raw materials. Cement manufacturers quarry, crush and grind these raw materials, burn them in kilns at high temperatures and then grind the resulting pellets with gypsum into a fine powder. Lime is used in a variety of applications including, in the steel industry, as a flux to remove impurities. Lime is made by quarrying, crushing, and grinding limestone and then burning it in kilns at high temperatures. The Complaint also alleges three relevant geographic markets in which to analyze the 3 effects of the Acquisition: (1) the market for cement in the region consisting of the province of Ontario, Canada, all of Michigan and the coastal markets around Lake Superior, Lake Michigan, Lake Huron, Lake Erie and Lake Ontario, including Green Bay and Milwaukee, WI, Chicago, IL, Cleveland, OH and Buffalo, NY (the "Great Lakes Region"); (2) the market for cement in the region within an approximately 70-mile radius of Syracuse, NY, including the metropolitan areas of Syracuse, Utica, Rome, Elmira and Binghamton, NY (the "Syracuse Region"); and (3) the market for lime in the States of Alabama, Georgia and Florida (the "Southeast Region"). The Complaint alleges that the markets for cement in the Great Lakes Region and the Syracuse Region and the market for lime in the Southeast Region are highly concentrated, and the Acquisition, if consummated, would substantially increase that concentration. In the Great Lakes, Lafarge and Blue Circle have a combined share of 47% of the market, and if the Acquisition proceeds, the top four firms would control 91% of the market. In the Syracuse Region, Lafarge and Blue Circle have a combined market share of 68%, and if the Acquisition proceeds, two firms would control 100% of the cement market in the Syracuse Region. In the Southeast Region, if the Acquisition proceeds and the Lime JV remains in place, Chemical Lime, Blue Circle/Lafarge and Carmeuse, through their joint ventures with each other, would link together 85% of the lime market and provide the three firms with incentives to reduce rivalry in the market. The Complaint further alleges that the Acquisition likely would eliminate direct competition between Respondents, increase the likelihood of coordinated interaction among the remaining firms, and result in increased prices for cement and lime. The Complaint also alleges that entry into the relevant markets would not be timely, likely or sufficient to deter or counteract the adverse competitive effects arising from the Acquisition. 4 IV. Terms of the Proposed Order The Proposed Order is designed to remedy the anticompetitive effects of the Acquisition through three divestitures. First, Lafarge must divest Blue Circle's cement business in the Great Lakes Region within 180 days of the consummation of the Acquisition to a Commission-approved buyer. Second, Lafarge must divest Blue Circle's cement terminal that serves the Syracuse Region to Glens Falls no later than 20 business days after the closing of the Acquisition. Third, Blue Circle must regain 100% ownership of the Lime JV from Chemical Lime, and then Lafarge must divest Blue Circle's lime business in the Southeast Region within 180 days of the consummation of the Acquisition to a Commission-approved buyer. Lafarge cannot consummate the Acquisition until the Lime JV is unwound. If Respondents do not complete the divestitures within the time specified in the Proposed Order, procedures for the appointment of a trustee to sell the assets have been agreed to and will be triggered. The Commission has also issued the Hold Separate Order. The purpose of the Hold Separate Order is to prevent interim harm to competition and to preserve the assets to be divested as viable and competitive businesses. The Hold Separate Order requires Respondents to hold Blue Circle's cement business in the Great Lakes Region and Blue Circle's lime business in the Southeast Region separate from the rest of their business operations until Lafarge has divested these assets to a Commission-approved buyer. The Hold Separate Order requires Respondents to preserve and maintain the marketability, viability and competitiveness of the relevant businesses. Respondents have agreed to the appointment of trustees to monitor their compliance with the terms of the Hold Separate Order. V. Opportunity for Public Comment 5 The Proposed Order has been placed on the public record for 30 days for receipt of comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will again review the Consent Agreement and the comments received and will decide whether to make the Proposed Order final. By accepting the Consent Agreement subject to final approval, the Commission anticipates that the competitive problems alleged in the Complaint will be resolved. The Commission invites public comment to aid the Commission in determining whether it should make final the Proposed Order contained in the Consent Agreement. The Commission does not intend this analysis to constitute an official interpretation of the Proposed Order, nor does this analysis modify in any way the terms of the Proposed Order.