Plans by CRH to acquire the Finnish building products group Addtek International for an estimated €350 million has run into trouble with the European Commission's competition regulators. It could result in a veto of the entire deal or the attachment of severe conditions. In a statement last night, the Commission said it was opening an in-depth four-month investigation into the proposed acquisition. In particular, 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 pre-cast concrete floors in Finland and the Netherlands".
This concern about the competition implications of the deal could be crucial for the CRH bid as these two countries account for more than 70 per cent of Addtek's business.
The Finnish company claims to be the biggest pre-cast flooring concern in Europe, with sales last year of €542 million and pre-tax profits of €35 million. Addtek's Dutch operations accounted for €161 million of sales and Finland €137 million.
Apart from Finland and the Netherlands, Addtek also has less extensive operations in Estonia, Sweden, Norway, Germany, Poland and Lithuania.
In March, the Commission invited third parties to submit their observations about the takeover and it is likely that third-party objections led to this full-scale investigation. CRH has been involved in the pre-cast industry in the Netherlands for many years. Its involvement in Finland dates back to the May 1999 acquisition of Finnsementti and Rudus operations for €415 million. Finsementti is the sole cement producer in Finland and it is this control of one of the main raw materials for pre-cast flooring that may have given the Commission its cause for concern, according to one analyst.
Meanwhile, market sources have indicated CRH is among a shortlist of companies which would be asked to submit bids to buy the Hepworth building products business. Others on the list are understood to include Hanson, Heywood Williams, IMI and some venture capital groups. The Hepworth business had sales of €260 million and profits of over €30 million last year and is valued at over €300 million.
