Regulator has the final word

30-07-2015
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The Star
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UNAUDITED INTERIM, FINANCIAL RESULTS AND CASH DIVIDEND DECLARATION FOR THE HALF-YEAR ENDED 30 JUNE 2015

Raumix’s acquisition of OMV Group blocked

THE Competition Commission has prohibited the proposed acquisition by Raumix Aggregates, a subsidiary of the listed road construction and rehabilitation group Raubex, of Kimberley-based construction quarry and ready-mix firm OMV Group.

Raubex group of companies is also active in the production and supply of value-added bitumen products and the production and supply of aggregates from quarries.

James Gibson, the financial director of Raubex, confirmed yesterday that it had received the notice from the commission prohibiting the merger.

Gibson said Raubex had requested the commission’s record of decision. Competition In terms of the proposed transaction, Raumix Aggregates intended to acquire OMV Kimberley and OMV Kimberley Mining, which collectively were known as the OMV Group.

The OMV group produces aggregates that are used, among others, as road stone by road contractors, in asphalt production and high-quality concrete applications.

The Raubex group of companies is active in a range of activities, such as road construction including surfacing, rehabilitation and maintenance, the production and supply of value-added bitumen products, the production and supply of aggregates from quarries, contract crushing of aggregates and other raw materials, the production and supply of asphalt and materials handling and benefaction for the mining industry. Post-merger, Raumix and ultimately Raubex would control the OMV Group.

Post-merger, Raumix and ultimately Raubex would control the OMV Group.

Mava Scott, a spokesman for the commission, said yesterday that the commission had prohibited the proposed transaction because it would substantially prevent or lessen competition in the market for the production and supply of aggregates used in the surfacing of national roads in the Kimberley area.

Scott said the merging parties had notified the commission about the proposed acquisition last year but had elected not to go ahead with it given the concerns raised by the commission at the time.

He said the commission’s concerns remained with the proposed transaction and apart from the OMV Group, there was no other supplier in Kimberley that had supplied the road stones required for the surfacing of national roads. Supply remedies Scott added that with the acquisition, Raubex would have the ability and incentive to raise costs to its competitors downstream in instances where they would require road stones that met the committee of land transport officials specifications as required by the SA National Roads Agency Limited.

He said the commission considered possible supply remedies proposed by the merging parties but concluded that the remedies did not adequately address the concerns.

In addition, the merging parties did not make any submissions on efficiencies or procompetitive gains that would alleviate the concerns, he said.

Shares in Raubex dropped 1.81 percent yesterday to close at R18.40.