Merger one step closer after £285m Mittal sale

By MARTIN FLANAGAN
Published on 16/11/2012 20:51

TWO construction materials giants have moved closer to merging their UK businesses with the £285 million sale of plants and quarries – including several Scottish sites – to Britain’s richest man, steel tycoon Lakshmi Mittal.

Mining giant Anglo American, which owns the Tarmac construction materials group in the UK, and Lafarge of France were ordered by the Competition Commission (CC) last May to sell the assets to address competition concerns over the proposed merger of their UK operations.

Yesterday’s sale, which also includes Tarmac’s 50 per cent holding in Midland Quarry Products, is to Mittal Investments, the private investment vehicle of the Lakshmi family,

The deal, as well as including one of the UK’s largest cement plants in Hope, Derbyshire, also takes in Anglo American’s ready‑mix plants north of the Border in Dumbarton, Dumfries, Dunbar, Greenock, Inverness, Livingston, Paisley, Port Dundas and St Boswells. It also involves a Lafarge ready‑mix plant in Kilsyth.

The CC said in May that there were only four UK producers of bulk cement in the UK and there was evidence that competition had been adversely impacted.

The assets to be sold encompass operations supporting Lafarge’s Hope facility, which has a capacity of 1.4 million tonnes.

Also included are a network of over 170 ready-mix concrete plants throughout the UK, five aggregates quarries, two asphalt plants, one marine aggregates wharf and a railway-linked aggregates depot.

About 800 jobs are transferring to new owners as part of yesterday’s deal, but no regional breakdown of numbers was divulged.

The sale of Tarmac’s share in Midland Quarry Products is subject to regulatory approval, with a pre-emptive right to buy in favour of Hanson Quarry Products Europe.

Lafarge and Anglo American said they expected their UK joint venture to be approved early next year. Lafarge entered the UK market in 1987, acquiring Redland in 1997 and Blue Circle in 2001.

Tarmac is the UK’s largest quarrying company and has been involved in some of the nation’s largest construction projects, including Wembley Stadium, Arsenal FC’s Emirates Stadium, the widening of the M1 motorway, the M25 resurfacing and the London Olympics stadium.

On top of the purchase price, £13m of working capital is to be released to the new joint venture. Nomura analysts said the deal could be seen as positive by investors worried over a potential cash call on shareholders at the Mittal family’s debt-burdened flagship asset, ArcelorMittal, the world’s biggest steelmaker.

Nomura said: “Spending $450m (£285m) on construction material assets now does not necessarily sound like someone who is thinking about imminently piling in a few billion dollars into his steel business as part of an equity raise.”

Anglo American, refocusing on core mining activities, tried for three years to find a buyer for Tarmac before agreeing its UK construction materials merger with the French group.