FAS declined the Novoroscement deal

FAS blocked a potential monopoly in the cement market. The agency rejected the request from Actual Investments and Novoroscement, which is controlled by billionaire Lev Kvetnoy, to buy Atakaycement (owned by Trust Bank, previously owned by Inteko).

The antimonopoly service informed Izvestia about this. The deal could result in limited competition in the cement market. If approved, the companies' combined market share in the Southern and North Caucasian federal districts would exceed 50%.

Did not agree

The Federal Antimonopoly Service (FAS) declined the request from Aktualnye investitsy and Novoroscement to acquire Atakaycement, as told to Izvestia by the antimonopoly service. They explained that this transaction might lead to limited competition in the cement market.

According to SPARK, billionaire Lev Kvetnoy is on the board of directors of Novoroscement and is a co-owner of Actual Investments. Izvestia sent a request to Novoroscement. Atakaycement was previously part of the Inteko Group of Companies and is now pledged to Trust Bank.

The press service of the bank of non-core assets “Trust” informed Izvestia that the bank’s activities are focused on effective asset management to enhance their value and eventually sell them at open auctions for the highest price. They stated that the Atakaycement plant is currently up for an open auction, allowing any interested investor to participate.

REFERENCE “Izvestia”

Atakaycement is one of the largest cement producers in the Southern Federal District, with a 10% market share in the Krasnodar Territory. It uses modern and environmentally friendly dry production methods. The plant has an annual capacity of 450 thousand tons of cement, with a revenue of 1.7 billion rubles in the first half of 2021 and an EBIDTA margin of 35%. It also has its own cement marl deposit with reserves of 21.9 million tons, and a license to use them until 2031. Trust Bank stated that the initial price of the asset is 4.3 billion rubles.

– Aktualnye investitsy JSC, Novoroscement JSC, and other entities in the same group are among the largest cement producers in the Southern and North Caucasian Federal Districts, according to FAS.

An assessment of the competition status in the general construction cement market revealed that if the proposed transaction goes through, the combined share of “Actual Investments”, “Novoroscement”, and “Atakaycement” in these federal districts would exceed 50%, both in sales and production capacity, as emphasized by the antimonopoly service.

– The implementation of the transaction would give Aktualnye investitsy JSC and NTs JSC the ability to unilaterally influence the conditions for cement circulation in the Southern and North Caucasian Federal Districts, potentially leading to competition restriction, according to FAS.

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.