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Friday, December 22, 2017

Justice Department Requires Vulcan to Divest 17 Aggregate Facilities in Order to Acquire Aggregates USA

Divestitures Will Preserve Competition in the Production and Sale of Aggregate in the Knoxville, Tennessee, Tri-Cities, Tennessee, and Abingdon, Virginia Areas

The Department of Justice announced today that it has reached a settlement that will require Vulcan Materials Company to divest all of Aggregates USA, LLC’s active aggregate quarries, plants, and yards in the Knoxville, Tennessee, Tri-Cities, Tennessee, and Abingdon, Virginia areas in order for it to proceed with its proposed $900 million acquisition of Aggregates USA from SPO Partners. 

The Department’s Antitrust Division and Tennessee’s Attorney General filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed transaction.  At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the department’s competitive concerns.

“Without relying on a regulatory behavioral decree, these divestitures will ensure that customers, and ultimately taxpayers, in Tennessee and Virginia continue to benefit from robust competition and competitive prices,” said Assistant Attorney General Makan Delrahim of the Antitrust Division.  “The acquisition, as originally proposed, would have eliminated one of the two suppliers of coarse aggregate in parts of east Tennessee and southwest Virginia.”    

According to the department’s complaint, Vulcan and Aggregates USA produce and sell coarse aggregate, a type of crushed stone, to customers such as the Tennessee and Virginia Departments of Transportation, highway construction contractors, and suppliers of asphalt concrete and ready mix concrete.  Coarse aggregate, an essential input in asphalt concrete and ready mix concrete, is used to build, pave, and repair roads and highways, and is used widely in other types of construction.  The complaint alleges that Vulcan and Aggregates USA are the only two producers of coarse aggregate in the Knoxville, Tennessee, Tri-Cities, Tennessee, and Abingdon, Virginia areas.  According to the complaint, the loss of competition between Vulcan and Aggregates USA would likely result in higher prices and poorer customer service for aggregate customers in those areas.

Under the terms of the proposed settlement, Vulcan must divest Aggregates USA’s 13 active quarries and yards, and four inactive quarries, in the Knoxville, Tennessee, Tri-Cities, Tennessee, and Abingdon, Virginia areas to Blue Water Industries, or an alternate acquirer approved by the United States.  The department said that the divestitures will remedy the acquisition’s anticompetitive effects by providing the acquirer with the quarries, including substantial reserves, and other assets necessary to compete in these local markets.

Vulcan, a New Jersey corporation headquartered in Birmingham, Alabama, is one of the largest producers of coarse aggregate and construction materials in the United States, with facilities in 20 states and the District of Columbia.  In 2016, Vulcan’s revenues were approximately $3.5 billion.

SPO Partners, a Delaware limited partnership headquartered in Mill Valley, California, invests in a wide range of industries, including industrial materials, media, telecommunications, energy, power, and real estate.  SPO has more than $7 billion in assets under management.  SPO acquired Aggregates USA in 2010.

Aggregates USA, a limited liability company headquartered in Birmingham, Alabama, produces and sells aggregate in Florida, Georgia, Tennessee, and Virginia.  In 2016, Aggregates USA’s revenues were approximately $124 million.  

As required by the Tunney Act, the proposed consent decree, along with the department’s competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Maribeth Petrizzi, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

Updated December 22, 2017