The proposed joint venture between Boral and CSR to combine their brick operations on Australia’s east coast has been given the go-ahead by the Australian Competition and Consumer Commission (ACCC)after it concluded its investigations in December 2014.

After initial scepticism that Boral would shut down its operations on the east coast if the merger was blocked, ACCC chairman Rod Sims said that after an extensive review of business records and the financial performance of Boral Bricks East, there was sufficient evidence to support Boral’s claims.

“Critical to the ACCC’s decision was the assessment that Boral would be unlikely to remain in clay brick manufacturing in eastern Australia if the joint venture does not proceed. Without this conclusion, the proposal raised considerable competition concerns,” he said.

The ACCC conducted extensive enquires with the joint venture parties and market participants since releasing its Statement of Issues in October last year.

“The ACCC’s view is that the proposed joint venture would be unlikely to substantially lessen competition,” Mr Sims said.

It is estimated that the joint venture, along with competitor Austral Bricks, will account for about 99 per cent of the clay bricks market.

The joint venture will be owned 60 per cent by CSR and 40 per cent by Boral, reflecting the relative valuation of the two businesses. There is no cash consideration as part of the proposed joint venture.

Boral CEO and Managing Director Mike Kane said he was pleased with the decision.

“This is good news for customers, employees and shareholders. 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,” he said.

CSR CEO and Managing Director Rob Sindel added that the joint venture is about retaining manufacturing in Australia and maintaining clay bricks as a choice for consumers.

“It will strengthen opportunities for employees and ensure that customers benefit from a strong supplier in the highly competitive cladding market in Australia,” he said.

The venture is expected to deliver between $7 million and $10 million in overhead savings and also result in redundancies as both companies downsizes the number of brick manufacturing facilities. Jobs in sales, administration and marketing across both companies are also expected to go.

The two companies are now proceeding with the remaining administrative and contractual issues for formation of the joint venture, which is expected to be completed in the first half of 2015.