The European Commission on Monday launched "an in-depth investigation to assess whether the proposed acquisition of Cemex Croatia by HeidelbergCement and Schwenk is in line with the EU Merger Regulation", expressing concern that the proposed takeover may reduce competition for grey cement in Croatia.

Commissioner Margrethe Vestager, in charge of competition policy, was quoted as saying that "the construction sector, like any other sector, needs competition. As cement is an essential part of the sector we need to make sure that consolidation does not lead to higher prices for construction companies and ultimately consumers in Croatia."

HeidelbergCement and Schwenk plan to acquire, via their joint subsidiary DDC, assets in Croatia and Hungary that currently belong to Cemex.

"At the request of the parties, the Commission referred the Hungarian part of the transaction to the Hungarian competition authority. Therefore, the Commission's investigation focuses only on the acquisition of Cemex' Croatian assets," according to a press release available on the European Union web site.

The Commission's preliminary concerns refer to the supply of grey cement in southern Croatia, including in particular in Dalmatia, where Cemex Croatia operates three cement plants in Split and faces competition from DDC's imports from Bosnia and Herzegovina.

"The proposed transaction would combine Cemex Croatia, the largest producer in the area, and DDC, the largest importer. The Commission's initial investigation indicates that the proposed transaction may remove a significant competitor from an already concentrated regional market."

"The remaining actual or potential suppliers may exercise only limited competitive pressure on the merged entity because of the transport costs to reach southern Croatia. Furthermore, the domestic cement suppliers Cemex Croatia and LafargeHolcim control all the cement terminals in ports along the Croatian coast. The Commission thus has preliminary concerns that the transaction may strengthen the market power of Cemex Croatia in southern Croatia and result in price increases for grey cement."

The transaction was notified to the Commission on 5 September 2016. The Commission now has 90 working days, until 23 February 2017, to take a decision. The opening of an in-depth inquiry does not prejudge the outcome of the investigation.

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