24/10    3 March 2010

The OFT has accepted undertakings offered by Aggregate Industries Limited (AI) to address competition concerns arising from its acquisition of Atlantic Aggregates Limited (Atlantic).

The OFT found that the acquisition originally created the prospect of a substantial lessening of competition in the supply of aggregates in Cornwall where the company would account for the majority of output. AI agreed to sell Atlantic's business in Gunheath, Cornwall to an upfront buyer approved by the OFT, and following consultation, the OFT has agreed Brookland Sand and Aggregates Limited as a purchaser for the business.

The sale fully removes the overlapping activities of AI and Atlantic in Cornwall, and resolves competition concerns originally raised by the OFT.

Amelia Fletcher, OFT Senior Director of Mergers said:

'This divestment will restore competition to a pre-merger level for the supply of aggregates within Cornwall, which will be of particular benefit to the construction sector in the area.'

NOTES

1. The undertakings are available from the undertakings in lieu of reference page.
   
2. Atlantic produced secondary aggregates from two sites: Gunheath in Cornwall and Lee Moor in Devon. AI is a supplier of secondary aggregates to the construction and building sector. Details are in the OFT's decision of 2 March 2009 (published 16 March 2009).
   
3. The Reference Test - the OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
   
4. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million, or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
   
5. Undertakings in lieu of reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate.
   
6. Upfront buyer - the OFT considered that, given the merger was completed and that consent from a third party, Imerys Minerals Limited, was required for any buyer to successfully run the business, a necessary requirement to suspend the duty to refer and consider undertakings in lieu was that a suitable purchaser should have been approved in principle by the OFT before the OFT consulted on the undertakings prior to acceptance.
   
7. Before accepting the undertakings the OFT gave notice of the proposed undertakings under Schedule 10 of the Enterprise Act 2002, and considered any representations made in accordance with that notice.
   
8. The period of time that it has taken for the OFT to accept undertakings in this case (approximately one year) reflects in part the challenge for AI in identifying a suitable purchaser and for that purchaser to obtain the necessary third party consents to enable the remedy to work. The OFT believed that it was appropriate to continue to seek undertakings in lieu in this case due to the efforts of AI seeking to secure a purchaser, and because there was evidence indicating that a suitable remedy would be achieved.
   
9. The full text of this decision will appear in the mergers section at a later date.