The proposed joint venture between the UK arms of Lafarge and Tarmac has been given the go ahead, although the UK's Competition Commission (CC) has stipulated that some divestment will be required to allow a new competitor to enter the market.
In February, the CC provisionally ruled that the joint venture between Anglo American - parent company of Tarmac - and Lafarge could damage competition in certain markets for construction materials.
In its final report, the CC has reiterated its concern that the joint venture would increase the danger of co-ordination in the market for bulk cement and would reduce competition in local and national markets for other products, including aggregates, asphalt and ready-mix concrete (RMX).
The CC has said it requires Anglo American and Lafarge to sell a significant portfolio of operations, paving the way for entry by a new competitor into the UK cement market, before their proposed construction materials joint venture can go ahead.
The operations that Anglo American and Lafarge will now be required to sell include a cement plant in Hope, Derbyshire, as well as the nearby Dowlow quarry and three linked rail depots.
The companies will also have to divest themselves of a substantial network of RMX plants, representing well over half of the proposed joint venture's RMX capacity.
Six aggregate quarries will have to go - as well as Tarmac's share of two quarries owned through its Midlands Quarry Products (MQP) joint venture with Hanson, and one rail depot
Two asphalt plants as well as Tarmac's share of five plants owned through MQP, must also be sold.
The CC said the precise details of how the assets will be sold and packaged would be finalised after publication of the final report, but it is envisaged that the Hope plant and supporting operations, including the Dowlow quarry and a substantial network of RMX plants, will go to a single buyer. This sale will have to be completed before the joint venture can go ahead.
The chairman of the Anglo/Lafarge Inquiry Group, Roger Witcomb, said, "A large-scale disposal like this is the only way to get a new entrant of sufficient scale to break into the UK cement market and thereby ensure that this joint venture does not damage competition.
"In bulk cement, there are currently only four UK producers and there is evidence that competition is not as effective as it could be. So, if the joint venture is to go ahead, it is essential to maintain the number of cement producers by bringing in a new player through the sale of the Hope cement plant - one of the largest in the country."
He said the combination of the two parties' RMX businesses as originally proposed would have played a significant role in increasing the potential for co-ordination in the cement market. The sales will address that issue as well.
"The disposals," he said, "will also remedy the loss of competition for the supply of RMX, aggregates and asphalt in particular areas of the country, given that the markets for these materials are quite localised, as well as for two specialist aggregates products - rail ballast and high purity limestone used for flue gas desulphurisation in coal-fired power stations."
He added, "Our investigation covered seven major products in over 250 geographic areas. Complexity was increased by the links between the products - aggregates are a key input into RMX and asphalt, and cement is the other key input into RMX."
Lafarge said it welcomed the CC's decision. It said that while certain assets would require divestment, the combination of the two businesses was expected to deliver "recurring synergies through increased operational efficiencies, improved logistics and value-added products".
The company said, "The joint venture will be a market-leading UK construction materials company in the supply of cement, concrete, aggregates, asphalt and contracting services."
Anglo American said, "We want to reassure customers, suppliers and stakeholders that there is no immediate change to the way they do business with Tarmac or to the service they receive from us as a result of this announcement. We will inform them in advance of any change, as and when we know more."
The proposal was for a 50:50 joint venture, to which each of them would contribute the bulk of their construction materials businesses in the UK. The two parties' main overlapping activities in relation to the joint venture are in the production and supply of cement, aggregates, asphalt and RMX.
In its final report, the CC concluded that the joint venture could lead to a substantial lessening of competition in the markets for the supply of bulk cement; the supply of rail ballast; the supply of high purity limestone, when used for flue gas desulphurisation (the abatement of acid gas emissions from coal-fired power stations); the supply of primary aggregates for construction applications in 19 local markets; the supply of asphalt in two local markets; and the supply of RMX in seven local markets.