Big moves in Brazilian cement market to prevent further industry concentration
Brazil’ competition regulator Cade approved Brazilian industrial group Camargo Correa's June purchase of a controlling stake in Portuguese cement maker Cimpor, subject to several conditions.
The main requirement from Cade is that Votorantim, a competitor with Camargo Correa in the Brazilian cement market, sell its stake in Cimpor. Votorantim and Camargo Correa both bought shares in Cimpor in 2010.
With 40% of Brazil's cement market, Votorantim is Brazil's largest cement maker. Through their shareholdings in Cimpor, both Camargo Correa and Votorantim increased their share of Brazil's market.
Cade also said Camargo Correa must sell some assets in Brazil's Sao Paulo state, the country's most populous and industrially developed region, and create a technological development program.
Cade reviewed the purchase as two decades of consolidation in Brazil's cement and concrete markets limit competition and keep prices high. The market conditions have created problems for a government seeking to spend hundreds of billions of dollars in road, port, and housing construction and for companies expanding mines, farms, factories and transport infrastructure to supply soaring Asian demand for commodities.
The Cade decision is expected to result in an agreement between Camargo Correa and Votorantim whereby Camargo Correa gets Cimpor assets in Brazil and Votorantim gets Cimpor assets abroad including Spain, Turkey, China and India.
Under the terms of the Cade decision, Votorantim's exit from Cimpor will be carried out either by selling its Cimpor stock back to Lafarge or by a sale to third party, according to Alessandro Octaviani Luis, the Cade board member who wrote the decision.
We take Votorantim's willingness to negotiate its departure from Cimpor as a symbol of good will to Cade, said Vinicius de Carvalho, Cade's president.
Luis on Wednesday said he recommended rejecting the initial Votorantim purchase of Cimpor on the grounds that it would raise Votorantim's dominance of Brazil's cement market.
While it has less than half of Brazil's total market, in some states, Votorantim's market share is as high as 70%, he said. In the cement market, Votorantim does not have the means to grow through acquisitions Luis added.
Votorantim said later in a statement it bought its Cimpor stake to expand internationally, and it was never its intention to remain a partner in the Cimpor with Camargo Correa.
Votorantim bought its shares in Cimpor from France's Lafarge (LAFP.PA), the world's biggest maker of cement.