Concrete Products

JAN 2018

Concrete Products covers the issues that attract producers of ready mixed and manufactured concrete focusing on equipment and material technology, market development and management topics.

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In its successful, steadfast rejection of a Martin Marietta Materials-proposed merger six years ago, Vulcan Materi- als stressed the likely sale of strategic sand & gravel and crushed stone assets that federal antitrust regulators would stipulate as a condition of approval. That foresight was manifested on the final business day of 2017 as Vulcan closed on Aggregates USA. The $900 million transaction commenced after the U.S. Department of Justice Antitrust Division issued a complaint challeng- ing the acquisition in U.S. District Court, along with a proposed settlement calling for the sale of one Virginia and 13 Tennessee quarries, plus two aggregate yards in the latter state, to investor Blue Water Industries. The properties fetched $290 million and span markets of significant overlap with Vulcan operations in Knoxville and the Tri-Cities, Tenn., plus southwest Virginia. The remainder of the Aggregates USA portfolio—three Georgia granite quarries plus distribution facilities serving Georgia, Florida and South Carolina—fits Vulcan's Southeast business. Justice alleged violation of the Clayton Act, which spells "relevant market" criteria for merger and acquisition review. Agency officials defined state depart- ment of transportation-qualified coarse aggregate as a relevant product market, where the product has narrowly defined properties and few, if any, substitutes in many concrete and asphalt applications. Regulators then painted the three areas the former Aggregates USA operations serve as relevant geographic markets, gauging competition in transportation terms: How many prospective aggregates producers can compete from areas outside Abingdon, Va., Knoxville and the Tri-Cities, where Vulcan and Aggregates USA have dominant positions? "For many customers, a combined Vulcan and Aggregates USA will have the ability to increase prices for DOT-qualified coarse aggregate," the Justice complaint contends. "The combined firm could also decrease service for these same customers by limiting availability or delivery options. DOT-qualified coarse aggregate producers know the distance from their own quarries or yards and their competitors' quarries to a customer's job site. Generally, because of trans- portation costs, the farther a supplier's closest competitor is from a job site, the higher the price and margin that supplier can expect." "In instances where Vulcan and Aggregates USA quarries or yards are the closest locations to a customer's project, the combined firm, using the knowl- edge of its competitors' locations, will be able to charge such customers higher prices or decrease the level of customer service," Justice posits. "The proposed acquisition will substantially lessen competition in the market for the production and sale of DOT-qualified coarse aggregate in the relevant areas." Beyond validating concerns Vulcan raised in Martin Marietta's 2011-12 over- ture, the settlement speaks to a pattern of federal government actions that the Cato Institute, a free-market Washington, D.C. think tank, weighs in its call to Congress to repeal the Clayton Act (1914) and the Sherman Act (1890). Anti- trust law, "Cato Handbook for Policymakers" authors argue: "debases the idea of private property," whereby the government transforms a company's assets into something that effectively belongs to the public; and "is based on a static view of the market," while ignoring the potential for markets to evolve and their tendency to move faster than antitrust laws. Vulcan took DOJ's Aggregates USA deal terms in stride. Management appears content with a significant Southeast portfolio boost and not inclined to school regulators in federal court on the limited value of a monopoly in a business where up to half the volume rests on the zero-sum nature of state and local agency budgets; and, day-to-day functions like hauling and truck routing, or long-term measures like site permitting, turn on the good graces of city, county and state officials mindful of price gougers. EDITORIAL BY DON MARSH SEMCO PUBLISHING CORPORATE OFFICE 8751 East Hampden Avenue, Suite B-1 Denver, Colorado 80231 U.S.A. P: +1.303.283.0640 F: +1.303.283.0641 PRESIDENT/PUBLISHER Peter Johnson, EDITOR Don Marsh, ASSOCIATE EDITOR Josephine Smith, PRODUCTION MANAGER Dan Fitts, GRAPHIC DESIGNER Michael Florman, PROJECT MANAGER Tanna Holzer, CIRCULATION Juanita Walters, SALES U.S., CANADA SALES Bill Green, Tel +1 414 212 8266 GERMANY SALES Gerd Strasmann, Tel +49 2191 93 1497 SCANDINAVIA, UNITED KINGDOM AND WESTERN EUROPE SALES Jeff Draycott, Tel +44 (0) 786 6922148 Colm Barry, Tel +46 (0) 736 334670 JAPAN SALES Masao Ishiguro, Tel +81 (3) 3719 0775 AUSTRALIA/ASIA SALES Lanita Idrus, Tel +61 3 9006 1742 Concrete Products, Volume 71, Issue 1, (ISSN 0010-5368, USPS 128-180) is published monthly by Mining Media Inc., dba Semco Publishing, 10 Sedgwick Drive, Englewood, Colorado 80113. Periodicals postage paid at Englewood Colorado, and additional mailing offices. Canada Post Publications Mail Agreement No. 40845540. 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