Tarmac sale: Lafarge most likely out of big four

Tarmac is expected to attract considerable interest from leading building materials companies, but any possible acquisition will depend on the extent of disposals required to satisfy competition requirements.

BDS Marketing estimates that Tarmac has a share of over 20% in the aggregates, asphalt, ready mix concrete and mortar markets. Only in cement and building blocks does it have a lower share.

According to BDS, of Tarmac’s four main rivals the least competition issues exist between itself and Lafarge. Some operations would have to be sold in the East Midlands and Yorkshire, as would Tarmac’s cement plant in Tunstead, but this wouldn’t affect Lafarge’s status as the largest cement supplier in the UK.

Of the remaining three competitors, Hanson is its largest rival, which would suggest that there would be too many competition issues for an acquisition to occur. But Hanson may be interested in picking up assets disposed of following Tarmac’s acquisition by another company.

Both Cemex and Aggregate Industries will also face competition issues, but not to the same extent as Hanson. A combination of Cemex and Tarmac would necessitate the sale of a number of ready mixed concrete plants in towns where both companies have a plant. Competition issues would also exist with sand and gravel in the South East and Scotland, and crushed rock in Wales and the Midlands.

Aggregate Industries and Tarmac are the two largest asphalt producers, so any move would mean a number of plants would have to be sold in the South East, North West and Scotland.

With all the competition issues facing companies currently represented in the UK, an overseas business or private equity company is not out of the question. Although Tarmac has interests in Spain, France, Germany, Czech Republic, Poland and Romania, BDS thinks that their relatively small presence would raise few competition issues.