Feds force local cement facility to change hands

July 11, 2016

A merger between two international cement companies—and a related antitrust investigation by the Federal Trade Commission—has put an east-side Indianapolis facility under new ownership.

The local facility, a cement terminal located at 1051 South Emerson Ave., had been owned by Essroc Cement Corp. but is now owned by Kosmos Cement Co., a subsidiary of Houston-based Cemex Inc.

The Indianapolis facility is among several properties in five metro areas that are being sold to satisfy FTC antitrust concerns.

Pennsylvania-based Essroc is the U.S. subsidiary of Italcementi S.p.A, an Italy-based cement company. In July 2015, Germany-based cement company Heidelberg Cement AG announced its plans to acquire Italcementi. Heidelberg’s U.S. subsidiary is Lehigh Hanson, Inc., which is based in Texas.

Both of these subsidiaries sell portland cement, a powder which is a key ingredient in the making of concrete. Following last summer’s acquisition announcement, the FTC launched an antitrust investigation into the deal.

In a complaint issued last month, the FTC said the acquisition would affect competition in five U.S. cement markets: Indianapolis; Baltimore/Washington, D.C.; Richmond, Virginia; Virginia Beach/Norfolk/Newport News, Virginia; and Syracuse, New York.

“The acquisition would remove competition between respondents (Italcementi and Heidelberg), and reduce the number of competitively significant suppliers from three to two in each of the relevant markets,” the FTC complaint said.

The reduced competition, the FTC said, would make it more likely that “consumers would be forced to pay higher prices or accept reduced services.”

To address these concerns, the FTC required Essroc to divest its Indianapolis cement terminal to Cemex by July 10. The Indianapolis divestiture agreement has been redacted from the public record, so the financial details of this transaction are not publicly available.

The Italcementi/Heidelberg merger is happening in two steps.

In step one, which took place July 1, Heidelberg acquired 45 percent of Italcementi’s stock—157.2 million shares—for a price of 1.67 billion Euros, or roughly $1.9 billion. In step two, Heidelberg will initiate a public cash tender to purchase the remaining Italcementi shares for a price of approximately $2.3 billion.

In a press release, Heidelberg said it expects step two to be complete by the end of this year.

The FTC is also requiring Essroc to divest several other facilities in the four other markets to an FTC-approved buyer.

Those other facilities include an Essroc cement plant and quarry in Martinsburg, West Virginia; seven Essroc terminals in Maryland, Virginia and Pennsylvania; and a Lehigh terminal in Solvay, New York. At the buyer’s option, the merged company will also be required to divest two additional Essroc terminals in Ohio.

Incidentally, this is not the first time that the Indianapolis cement terminal has changed hands between Essroc and Cemex. In December 2013, Essroc announced that it had acquired the Indianapolis property from Cemex in an asset exchange that included the sale of Essroc’s bulk cement terminal in Charlotte, North Carolina.

Neither Essroc nor Cemex would comment on either the 2013 transaction or the current one, although Cemex did confirm that it has acquired the Indianapolis facility from Essroc.


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