Building materials firms Boral and CSR will merge their clay bricks businesses into a major market player after receiving the all-clear from the competition watchdog.
The Australian Competition and Consumer Commission has approved the joint venture, saying it doesn’t believe the move will substantially lessen competition.
Boral had previously warned that the local brick-making industry could die if the competition watchdog failed to approve the joint venture.
The ACCC’s approval allows Boral and CSR to merge their east coast clay brick operations.
The new business will be a major market player, along with rival Austral Bricks.
After the companies proposed the joint venture in April, the ACCC flagged concerns about whether it would create a duopoly and cause a spike in brick prices.
The new joint venture, along with Austral, will account for about 99 per cent of the clay bricks market.
ACCC chairman Rod Sims said the watchdog decided to back the joint venture because, it believed, Boral would pull out of brick making in eastern Australia if it was prevented from teaming up with CSR.
While the ACCC was initially sceptical about Boral’s claim, it changed its mind after a review of the Boral Bricks East business and examining under oath two senior executives from Boral and CSR.
“The ACCC concluded that there was sufficient evidence to support the claims that Boral would exit brick manufacturing on the east coast and that, on balance, the ACCC should not oppose the joint venture,” Mr Sims said in a statement on Thursday.
Boral and CSR welcomed the ACCC’s decision.
“With Australian brick manufacturing being challenged as a result of a reduction in brick usage and high input costs, the joint venture will allow us to drive efficiencies across the combined network of operations, creating a more sustainable business,” Boral chief executive Mike Kane said.
The joint venture, which will be 60 per cent owned by CSR and the remainder by Boral, is expected to be set up by the end of June.
It is expected to generate revenues of about $230 million, and save its owners between $7 million and $10 million.