Justice Department Requires Divestitures in Cemex’s Acquisition of Rinker Group

On April 4, the DOJ announced that it reached a settlement that will require Mexico-based Cemex S.A.B. de C.V. to divest 39 ready mix concrete, concrete block, and aggregate facilities in Arizona and Florida in the event Cemex succeeds in its hostile takeover of Australia-based Rinker Group. The DOJ said that without the divestitures the proposed acquisition would substantially lessen competition for ready mix concrete in certain metropolitan areas in Arizona and Florida, as well as result in increased prices for ready mix concrete, concrete block, and aggregate sold to customers handling state Department of Transportation and large building projects. The total value of the Cemex/Rinker transaction, including Rinker’s debt, is approximately $12 billion.

Ready mix concrete is a building material used in large construction projects including buildings, highways, bridges, tunnels, and other projects. Concrete block is a building material used in the construction of residential and commercial structures. Aggregate is crushed stone and gravel produced at quarries, mines, or gravel pits that is used in, among other things, the production of ready mix concrete, concrete block, and asphalt.

The DOJ concluded that the deal would have resulted in increased prices for ready mix concrete sold to customers handling state Department of Transportation projects and other large building projects in the metropolitan areas of Fort Walton Beach/Panama City/Pensacola, Jacksonville, Orlando, Tampa/St. Petersburg, and Fort Myers/Naples, Florida., and the areas of Flagstaff and Tucson, Arizona. In Flagstaff, Rinker and Cemex are the only two competitors capable of supplying ready mix concrete for these large projects, and in the other areas in which divestitures are being required there are only one or two firms in addition to Cemex and Rinker that are capable of serving large projects.

The DOJ also said that the acquisition also would have resulted in an increase in prices for concrete block for a significant number of customers in the metropolitan areas of Tampa/St. Petersburg and Fort Myers/Naples, Fla., where Cemex and Rinker account for more than 60 percent of concrete block sales.

Finally, the DOJ said that the acquisition would have resulted in increased prices for aggregate to a significant number of customers in the Tucson, Arizona, area where Cemex and Rinker are among a small number of firms capable of supplying aggregates meeting state Department of Transportation specifications.

The settlement agreement remedies the DOJ’s competitive concerns. Without the divestitures required by the DOJ, purchasers of ready mix concrete, concrete block and aggregate in these areas of Florida and Arizona, including state departments of transportation, would likely have faced higher prices. The DOJ’s action will ensure that these customers will continue to receive the benefits of competition.

Under the terms of the proposed consent decree, once Cemex obtains control of Rinker, Cemex must divest certain ready mix concrete assets to a single buyer in each of the areas of competitive concern. The terms of the proposed consent decree also require the divestiture of all of Rinker’s concrete block-related assets in the Tampa/St. Petersburg and Fort Myers/Naples areas. Cemex must divest two aggregate plants in the Tucson, Arizona, area to the same acquirer that purchases the two ready mix plants to be divested at the same locations. Under the consent decree, the Antitrust Division must approve the buyer of all of the divested assets.

Andre Barlow
abarlow@dbmlawgroup.com