Saint-Gobain Acquisition of GCP Gets Go Ahead

SAINT-GOBAIN’s proposed acquisition of GCP Applied Technologies has been given the go ahead by the Competition and Markets Authority (CMA).

The CMA had investigated the merger of Saint-Gobain and GCP as it was thought that it could result in undue market domination of supply.

The investigation had taken place in the context of a parallel acquisition by Sika AG of the MBCC Group, both of which also supply chemical admixtures in the UK.

The Sika/MBCC merger was referred for investigation in August following the CMA’s finding that it may be expected to result in a ‘substantial lessening of competition’ (SLC).

However, Sika and MBCC said that they intend to submit remedies to address lessening of competition, but the CMA does not now consider that there is a realistic prospect that their merger will take place.

In this context, the CMA felt that the Saint-Gobain acquisition of GCP Applied Technologies would not have a substantial effect on the UK market.

Chemical Admixtures

Chemical admixtures are specially formulated chemicals added to cementitious products (concrete, cement and mortar) to modify their properties, for example to slow their setting rate so they can be transported over longer distances.

Chemical admixtures also enable concrete producers to reduce the amount of cement required to produce concrete, which not only cuts the overall cost of concrete production, but also reduces its environmental impact.

Modern construction methods rely on chemical admixtures, which are therefore considered an essential part of the production of cementitious products.

Competitive Dynamics

Because large customers choose suppliers on volume and logistics capabilities and the need to have access to the latest admixture developments to maintain a competitive edge, their choice of potential suppliers is more limited. This means that the CMA considered the differentiation between suppliers meant the market is already diverse.

It found that the Saint-Gobain-GCP merger would have only a modest share of supply of chemical admixtures in the UK, of between 20-30%. This would make it the third-largest supplier behind Sika and MBCC, who would remain the market leaders.

It said GCP is a materially weaker supplier than Sika, MBCC, and Saint-Gobain (Chryso) in several ways. In particular, GCP’s investment in innovation has declined in recent years and it also lacks vertically integrated polymer production, limiting chemical admixture innovation. These factors have limited GCP’s ability to compete, and it is no longer the main supplier to any large customer.

The CMA considered the competitive constraint exerted by other suppliers and found that Sika and MBCC, which are the strongest suppliers by some distance, would exert a strong constraint on the merged companies.

The CMA said that Oscrete and Mapei, although significantly smaller than Sika and MBCC, would also be competitors.

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