Building materials group CRH has withdrawn its €350 million (£275 million) offer to buy the Finnish group Addtek and is now renegotiating a new deal that may not fall foul of the European Commission competition regulators.
The EU began a four-month investigation into the proposed takeover by CRH two months ago after it had initially expressed concerns about the effect of the deal on competition in the precast floors market in Finland and the Netherlands. At the time, the Commission said it had concerns that the deal "could significantly reduce competition and therefore translate into higher prices in a number of products, mainly in precast concrete floors in Finland and Holland".
CRH general manager-finance, Mr Myles Lee, said that as the EU investigation progressed it had become clear that the Addtek takeover in its current form would not be approved.
He said that CRH is now back in negotiations with Addtek to devise a restructured deal that might be approved by the Commission.
He declined to speculate on what changes might be made to the original proposal, but industry sources believe that some fundamental changes will be required if the Commission is to give its go-ahead to a revised deal.
Addtek is one of the biggest precast flooring companies in Europe with sales last year of €542 million and pre-tax profits of €35 million. The Dutch and Finnish operations, which are at the centre of the Commission objections, accounted for €161 million and €137 million sales respectively.
In the Netherlands, it is understood that a large number of Addtek's small and mediumsized customers expressed concern to the Commission about the scale that a combined CRH/ Addtek would have in the precast flooring market. Most Dutch competitors are far smaller than CRH/Addtek and might find it difficult to compete. One solution for CRH in the Netherlands might be to simply buy some of Addtek's assets, said one analyst.
In Finland, the problem is different and relates to CRH's monopoly of the local cement market through its Finncemennti subsidiary. Buying Addtek and its Parma Betonia subsidiary would mean that CRH companies would not only control the supply of grey cement but would also have a large part of the precast market that uses grey cement as one of its main raw materials.
Analysts believe that a possible solution would be for CRH to sell Addtek's stake in Parma Betonia to the other main shareholder, Heiderberger.
The original EU investigation was due to be completed in August.
But with a new investigation likely into any revised deal, it will be much later in the year before the final outcome becomes clear.
Meanwhile, CRH said yesterday that it spent €294 million on development initiatives in the first half of this year.
