Competition issues will be a key factor for which company acquires Tarmac

• 
• 13th October 2007
• Quarrying
 

It is expected that there will be considerable interest in Tarmac following Anglo's decision to sell its heavy building materials subsidiary. Tarmac has established itself as the major supplier of aggregates, asphalt, ready mixed concrete and other products in the UK.

For the other four leading building materials companies, one of the key success factors to a possible acquisition will be the extent of asset disposals that would be required to meet the Government's competition requirements.

The leading marketing consultancy in this sector, BDS Marketing, estimates that Tarmac has a share of over 20% in the aggregates, asphalt, ready mixed concrete and mortar markets.  Of its other main products, only in cement and building blocks does Tarmac have a lower percentage share of the market.

Tarmac competes against four other major international companies in the UK.  Its largest competitor is Hanson which has also recently been acquired.  BDS Marketing believes that there would be too many competition issues involving Tarmac and Hanson for such an acquisition to occur.  However, Hanson would be interested in purchasing assets that would have to be disposed of following the acquisition of Tarmac by another company.

Both Cemex and Aggregate Industries also face competition issues but not to the same extent as Hanson.  Aggregate Industries and Tarmac are the two largest asphalt companies and a number of plants would have to be sold in areas such as the south east, north west and Scotland.  Both companies are also particularly strong in aggregates in the East Midlands and Scotland.

A combination of Cemex and Tarmac would give a different competitive situation.  A number of ready mixed concrete plants would have to be sold in towns where both companies have a plant.  In aggregates, the main competition issues are likely to be sand and gravel in the south east and Scotland, and crushed rock in Wales and the midlands.

BDS Marketing believes that there are less competition issues between Tarmac and Lafarge.  Lafarge is also known to be keen to expand.  The main areas where some operations would have to be sold are likely to be the east midlands and Yorkshire.  Both companies have a strong share in Nottinghamshire sand and gravel and Leicestershire hardstone, where Tarmac's interest is through Midland Quarry Products. Tarmac's cement plant at Tunstead would probably have to be sold, but Lafarge would remain as the largest cement supplier in the UK.

Tarmac also has interests in Europe including Spain, France, Germany, Czech Republic, Poland and Romania, although BDS thinks that as the company has a relatively small presence in these countries, few competition issues will arise.

The UK competition issues for existing suppliers, together with Tarmac's leading share in most of its markets, will make the business attractive to those companies not currently represented in the UK.  These companies are likely to include overseas cement and road contracting businesses, and private equity companies.

BDS Marketing is currently preparing its annual outputs reports that estimate the outputs and market shares at individual locations and companies.  These surveys will form an integral part of the marketing analysis and due diligence work that companies will need to undertake to assess the attractiveness of Tarmac.

BDS Marketing has over 25 years' experience of the quarry products industry. It publishes a number of reports on the aggregates, asphalt, ready mixed concrete, concrete products, cement and waste industries. The consultancy also completes over 50 surveys each year that have been commissioned by individual clients.  These can relate to new product development, assessing market size, customer research and acquisition appraisals.

Mr J A Clapp
BDS Marketing Research Ltd
Lonsdale House
Single Hill
Shoscombe
Nr Bath BA2 8LZ
Tel: (01761) 433035                                       
Fax: (01761) 434579