Word from Brussels has it that CRH's #350 million (£275 million) bid for Finnish group Addtek is in serious trouble with the European Commission's competitor regulators. Sources believe that the conditions attached by the Commission may be so stringent as to make the acquisition not worthwhile for CRH.
There seems to be clear competition implications in both the Netherlands and Finland, which together account for more than 70 per cent of Addtek's turnover.
If the EU demands that CRH sell Addtek's precast flooring operations in the Netherlands or Finland, the rationale for the deal comes under question.
The Commission's decision to proceed with a detailed investigation of the Addtek acquisition is largely at the behest of Addtek's customers in the Netherlands and Finland, who fear that the combination of CRH and Addtek could put them at a severe disadvantage. In its preliminary opinion in early March, the Commission invited submissions from interested parties and it is those submissions that have led to the formal investigation.
According to the Commission, a large number of Addtek's small and medium-sized customers were seriously concerned 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 cope with the size of the competition. In Finland, the problem is different but no less problematic for CRH. Following its Finnsemennti acquisition two years ago, CRH is the sole producer of grey cement in Finland. Buying Addtek and its Parma Betonia subsidiary would mean that CRH companies would not just control the supply of grey cement but would also have a large part of the precast market that uses that cement as one of its main raw materials.
The possibility of CRH cross-subsidising its precast subsidiary in Finland is the main concern of the Commission. One option would be for CRH to sell Addtek's stake in Parma Betonia to the other main shareholder, Heiderberger, but again this puts a question mark over the entire deal.
The Commission will need some convincing arguments if this particular acquisition is not to bite the dust.
