Cartel in cement industry looms

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BAGUIO CITY  – Alarmed construction industry stakeholders and consumer groups in Northern Luzon warned of an emerging cartel in the country’s cement industry once the Philippine Competition Commission (PCC) will approve the largest merger and acquisition deal in the local cement industry between San Miguel Corporation (SMC) and Holcim Philippines, Inc. (HPI).

Public works contractors, housing developers, and consumer groups called on the PCC not to approve the SMC-HPI deal because it will defeat the purpose of a highly competitive industry and will result to the gross disadvantage of the general public due to the expected increase in the prices of cement.

Earlier, Lafarge-Holcim, Europe’s largest cement maker, signed an agreement selling the operations of its Philippine subsidiary to SMC for a value of $2.15 billion with the transaction expected to be sealed in the fourth quarter of this year subject to regulatory approvals.

The numerous contractors, housing developers, and consumer groups have a common view: “The PCC should closely look into the deal so that the Filipino people will suffer the consequences of an emerging monopoly in the country’s cement industry by a single corporation that has control over some of the major food products and beverages distributed in the country.”

Lafarge-Holcim stated it was divesting its entire 85.73 percent shareholding in HPI which operates 4 integrated cement plants and one grinding plant.

Proceeds from the $2.15 billion buyout of SMC will be used by HPI to further improve the cement manufacturer’s debt ratio by approximately 0.3 times.

Both SMC and HPI informed the Philippine Stock Exchange about the deal in separate disclosures Friday, with the latter stating that the sellers believe the transaction is for the best interest of the company which is planning to diversify its business in the country.

“If San Miguel was able to deprive the coconut farmers from the coconut levy funds for their supposed welfare and development of the country’s coconut industry, the emerging cement cartel will definitely be far more worse for the Filipino people who will be made to suffer because of the expected skyrocketing prices of cement,” another source from housing developers in Northern Luzon added.

Aside from the inability of the people to have their own homes because of expected high cement prices, sources also pointed out that the government’s “Build, Build, Build” Projects will also be compromised once the PCC will pass the SMC-HPI deal.

SMC reportedly owns at least 70 percent of the Pangasinan-based Northern Cement and it has a huge share on the Bulacan-based Eagle Cement. With the current set-up of ownership of the latter, the proposed merger of the SMC and HPI will definitely result to a cartel, which will be grossly disadvantageous to the Filipino people based on the assessment of experts from the construction industry.

Under existing PCC rules and regulations, SMC and HPI must notify the competition watchdog of their definitive agreement within 30 days after the signing of the pertinent documents relative thereto.

Under the competition law, mergers and acquisitions that are deemed large enough to be potentially anti-competitive are required to be notified to the PCC for review.

The sources appeal to the PCC to closely look into the SMC-HPI merger and acquisition agreement because of the evident emergence of a cartel in the country’s cement industry as SMC owns almost all of the largest cement plants operating in the country and its effect to the consumers will be potentially disadvantageous, especially with the projected increase in the prices of cement that will be already beyond the reach of ordinary Filipinos.

The sources also urge President Rodrigo Duterte to separately look into the matter because the Chief Executive has made it clear that he does not want oligarchs to lord over businesses that are endowed with public services in order for Filipinos to enjoy cheaper cement prices when there is the presence of healthy competition in the said industry.

First Stronghold Cement Industries, Inc. will purchase 85.73 percent of HPI,  reported a wholly owned unit of San Miguel Equity Investment Inc., a subsidiary of SMC.

SMC reportedly won the auction of HPI which pitted it against Anhui Conch, the largest cement manufacturer in mainland China in the final round of the said auction of the country’s largest cement manufacturer.

Lafarge-Holcim recently sold its assets in Indonesia, Malaysia and Singapore.

The sources reiterated that the PCC should exercise due diligence on the matter because approving the deal will definitely create more problems for the Filipino people, like what happened to the coconut levy funds that were acquired by SMC from the coconut farmers, which it reportedly used to propagate its multi-billion business operations.

BY HENT

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