12 May 2004
Boral Takeover Bid for Adelaide Brighton

Boral Limited notes today's announcement by the Australian Competition and Consumer Commission that it will oppose the proposed takeover of Adelaide Brighton Limited.

Boral disagrees with the ACCC's decision that the proposed acquisition is likely to have significant detrimental effects on competition in downstream markets. Boral's view is that having regard to the continuation of Independent Cement & Lime's (ICL) exclusive distributorship role for Adelaide Brighton, the on-going constraints provided by imports, proposed divestments and undertakings indicated to the ACCC, the proposed takeover will not result in a substantial lessening of competition in any of the relevant markets.

The ACCC has raised competition issues in its news release. Boral's response to these issues is outlined below:

Australian Cement Suppliers

There will be no reduction in the number of domestic cement suppliers around Australia as a result of the merger and the merger does not affect actual and potential import suppliers. Boral does not compete as a cement supplier against Adelaide Brighton in Western Australia, the Northern Territory and South Australia. Boral is already in a joint venture with Adelaide Brighton in Queensland via Sunstate Cement. The continuation of ICL's exclusive distributorship of Adelaide Brighton product in Victoria and New South Wales will maintain three competing suppliers in Victoria and New South Wales. There have been a number of new entrants in supplying cement around Australia using imported cement and clinker.

ICL currently is a vigorous and effective independent competitor in Victoria and NSW. This won't change as a result of the merger. ICL is the largest supplier to the Victorian market. Its suite of assets, strong financial resources and legally enforceable exclusive distributorship and long term supply agreements, confirm its capacity to continue as a vigorous competitor. Boral has indicated to the ACCC that it is prepared to divest Adelaide Brighton's 50% interest in ICL.

Imports

Boral's cement pricing strategy is directed at minimising import entry margins and benefits Australian cement consumers in the form of lower domestic prices. The Australian cement industry has undergone significant and sustained importing threats which has intensified post the Asian crisis and will continue as Asian economies recover and further develop.

Imports, and the threat of imports, provide real and ongoing competition and substantially and effectively constrain market pricing. There will continue to be substantial excess South East Asian capacity in Indonesia, Malaysia, Thailand and Philippines, currently around 50 million tonnes per annum. In addition, there is substantial excess capacity in other Asian countries, such as Japan which currently supplies cement into Australia. This excess capacity overhangs Australia's domestic market of 9 million tonnes per annum. It can be demonstrated that there is a close relationship between Australia's market pricing and import parity pricing (IPP).

Total industry clinker/cement imports are currently around 10% of the Australian market which demonstrates availability, quality and price competitiveness of Asian suppliers. Around half of these imports are brought in by independent suppliers to the Australian market currently. Independent importing activity could very significantly increase if domestic pricing was unconstrained. In each state there are many independent cement consumers; the threat to import cement to meet their needs constitutes a sustained and significant competitive constraint upon Boral and dictates Boral's approach to the setting of domestic cement prices.

Even after the merger, the substantial capital investment in Australian cement plants will remain exposed to the threat of loss of critical cement sales to independent cement consumers. Australia, with nearly all of its cement demand near coastal regions, remains very exposed to the import threat.

At Boral's request, CoRE Research, a leading competition and regulatory economic consultancy, has prepared a report in relation to imports of cement as a constraint on domestic competition. CoRE Research's report concluded that on the basis of the information available to it:

". . . imports appear to provide a strong constraint on any post-acquisition lessening of competition. Indeed the Australian cement industry is close to the textbook model of a small country importer, with domestic and imported cement close to perfect substitutes, no significant barriers to increased imports and little interaction between Australian demand and import prices. In this situation imports provide an effective competitive constraint on the Australian cement industry."

Boral sees the merger of Adelaide Brighton as the logical next step to improve the competitiveness of domestic cement manufacturing in the face of the Asian supply overhang with no detriment to Australian cement consumers.

Downstream Pre-mixed Concrete, Concrete Masonry and Flyash Markets

The proposed divestments which Boral has indicated to the ACCC in these sectors will address competition issues which may arise in relation to the relevant markets.

* * * * * * * *

Boral is reviewing its position in relation to the ACCC's decision and request for an undertaking from Boral not to proceed with the acquisition. Boral will keep the market informed as soon as this review has been completed. The takeover offer remains subject to all conditions set out in Section 6.4(a) of the Bidder's Statement, which includes the ACCC condition, and is scheduled to close at 7.00pm (Sydney time) on 4 June 2004, unless further extended.

For further information please contact:

Phil Jobe
Executive General Manager
Boral Cement
Telephone
(02) 9033 4001 or 0401 895 600

Ken Barton
Chief Financial Officer
Boral Limited
Telephone
(02) 9220 6385 or 0401 896 831

Kylie FitzGerald
General Manager, Corporate Affairs
Boral Limited
Telephone
(02) 9220 6390 or 0401 895 894



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