FAS rolled up the Novoroscement deal
FAS stopped the emergence of a monopoly in the cement market. The agency refused Actual Investments and Novoroscement, controlled by billionaire Lev Kvetnoy, to acquire Atakaycement (owned by Trust Bank, previously owned by Inteko).
This was reported to Izvestia by the antimonopoly service. The deal could lead to limited competition in the cement market. Had the petition been approved, the combined market share of the companies in the Southern and North Caucasian federal districts would have exceeded 50%.
Did not agree
The Federal Antimonopoly Service (FAS) refused Aktualnye investitsy and Novoroscement to acquire Atakaycement, Izvestia was told in the antimonopoly service. According to the agency, the implementation of the transaction may lead to limited competition in the cement market, they explained.
According to SPARK, billionaire Lev Kvetnoy is a member of the board of directors of Novoroscement and a co-owner of Actual Investments. Izvestia sent a request to Novoroscement. Atakaycement was previously part of Inteko Group of Companies, and is now pledged to Trust Bank.
The press service of the bank of non-core assets “Trust” told Izvestia that the bank’s activities “are aimed at the effective management of assets in order to improve them, increase their market value and then sell them at open auctions at the maximum price.” The Atakaycement plant is now put up for an open auction, in which every interested investor can take part, they said.
REFERENCE “Izvestia”
Atakaycement is one of the largest cement producers in the Southern Federal District, it occupies 10% of the Krasnodar Territory market. This is a modernized production, working according to a modern and environmentally friendly dry method. The design capacity of the enterprise is 450 thousand tons of cement per year, revenue for the first half of 2021 amounted to 1.7 billion rubles, EBIDTA margin is 35%. The plant has its own cement marl deposit with reserves of 21.9 million tons, and has a license to use them until 2031. The initial price of the asset is 4.3 billion rubles, they said at Trust Bank.
– Aktualnye investitsy JSC, Novoroscement JSC and business entities included in the same group of persons are among the largest cement producers in the Southern and North Caucasian Federal Districts, the FAS said.
An analysis of the state of competition in the market for general construction cement showed that in the event of the transaction declared in the application, the total share of the group of persons “Actual Investments”, “Novoroscement” and “Atakaycement” in the market in these federal districts will exceed 50% when calculating both in terms of sales and and in terms of production capacity, stressed in the antimonopoly service.
– The implementation of the transaction will lead to Aktualnye investitsy JSC and NTs JSC getting the opportunity to unilaterally influence the general conditions for the circulation of cement in the Southern and North Caucasian Federal Districts, which under certain conditions may lead to a restriction of competition, – the FAS believes.
Dangerous process
The reason for the refusal was the possibility of a dominant position in the cement market in the Southern Federal District and the North Caucasus Federal District, said Irina Akimova, member of the General Council of the Association of Antimonopoly Experts, partner of BGP Litigation. According to her, the most likely negative consequences for the market that could arise if the FAS deal is approved would be the establishment of monopoly high (or monopolistically low) prices, the imposition of unfavorable conditions on counterparties (goods in load, other terms and payment terms).
Monopoly in any industry really poses a risk of unjustified price increases due to reduced competition, agrees the president of the Osnova Group of Companies, the chairman of the commission on the development of the building materials industry, technologies and industrial construction of the public council under the Ministry of Construction, Alexander Ruchev.
– As for the cost of cement, this type of building materials, unlike many other items (such as rebar or wood), has not risen in price this year so much. During the first half of the year and at the beginning of the second, prices grew at a low pace and only in October grew up due to a lack of supply, he said.
In a number of regions, some plants were closed for repairs and could not meet the growing demand, there was a shortage of cement on the market, said Alexander Ruchev. As a result, over the past year, the cost of cement has increased by an average of 10-12%. Most of all, cement has risen in price in Siberia – by 13%, he noted.
High construction volumes in Russia against the backdrop of a poorly developed resource base and without market monopolization lead to seasonal price hikes for basic building materials, said Sergey Zaitsev, head of the center for new buildings of the federal company Etazhi.