CRH to divest operations to complete Ash Grove deal

By |  June 14, 2018

Some of the biggest industry deals in recent memory took place in 2017, with CRH’s acquisition of Ash Grove being among the latest. Photo courtesy of Getty Images

CRH, parent company of Oldcastle, will divest several facilities to complete its $3.5 billion purchase of Ash Grove Cement Co.

A complaint to the Federal Trade Commission (FTC) alleges that, as proposed, CRH’s acquisition of Ash Grove will harm portland cement competition in Montana; sand and gravel competition in the Omaha, Nebraska, and Council Bluffs, Iowa region; and crushed limestone competition in the region of Johnson County, Kansas.

Under a proposed settlement, CRH will divest a cement plant, two sand and gravel plants, one sand and gravel pit, three limestone quarries and two hot-mix asphalt plants.

According to the complaint the FTC received, CRH’s proposed acquisition of Ash Grove would reduce the number of significant competitors in several markets, increasing the likelihood that the merged company would unilaterally exercise market power and that consumers in the affected areas would be forced to pay higher prices.

Both CRH and Ash Grove manufacture and sell portland cement. The complaint alleges that CRH and Ash Grove are the two leading suppliers of cement in Montana, and the acquisition would eliminate substantial competition between the two companies, thus forcing customers to pay higher prices.

Additionally, CRH and Ash Grove both supply construction-grade sand and gravel, which is used in concrete, road base, asphalt, construction fill and other construction projects in Omaha, Nebraska, and Council Bluffs, Iowa. Because sand and gravel has no close substitutes in that area and because the parties are the two leading suppliers of sand and gravel in the region, the complaint alleges that customers are unlikely to switch to other products when faced with a small but significant price increase.

Both companies also produce crushed limestone, which is used as an input in cement, concrete, asphalt, metal refining, construction base, and other construction products. Because there are no close substitutes for crushed limestone in the Johnson County, Kansas market, customers are unlikely to switch to other products in the event of a small but significant price increase, according to the complaint.

Under the terms of a settlement, CRH is required to divest its cement plant and quarry in Three Forks, Montana, to Grupo Cementos de Chihuahua (GCC). Also under the settlement, because the CRH cement plant in Montana currently sells a significant amount of cement into Canada through two CRH terminals in Alberta, Canada, GCC will have the option to use those terminals for three years.

CRH also agreed to purchase, at GCC’s option, cement produced at the plant for distribution in Canada for up to three years.

In Omaha, CRH is required to divest two sand and gravel operations and one sand and gravel pit to Martin Marietta. CRH is also required to divest a hot-mix asphalt plant and two limestone quarries in Olathe, Kansas, as well as another hot-mix asphalt plant and another limestone quarry in Louisburg, Kansas, to Summit Materials.

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