Cemex to get bigger chunk of cement market
Mexican cement maker Cemex, the No. 1 player in the United States, is poised to grow even stronger north of the border with a planned $15.3-billion takeover of an Australian firm with substantial American holdings.
Following more than five months of wrangling, the board of Australia’s Rinker Group said Tuesday that it would recommend shareholders accept Cemex’s latest offer of $15.85 each for Rinker’s Australia-traded shares. That’s a 22% premium over Cemex’s original bid of $13 a share made in October, which Rinker’s board rejected.
For owners of Rinker’s U.S.-traded shares, the deal will give them $79.25 a share.
If Rinker shareholders approve the deal, it will be the biggest acquisition by a Mexican company and the first hostile takeover executed by Lorenzo Zambrano, Cemex’s expansion-minded chief executive.
Rinker, which posted revenue of $5.1 billion last year and net income of $740 million, derives about 85% of its earnings from its U.S. operations. It has plants in 29 states, including California, but it is particularly strong in Arizona and Florida.
The Justice Department last week said it would require Cemex to sell off 39 facilities in those two states as a condition for approving the deal. Federal officials said that without the divestitures, the acquisition “would substantially lessen competition” in a number of metropolitan areas in Florida and Arizona, leading to higher prices for customers.
Cemex is looking to add to its American holdings just as the U.S. housing market has hit a rough patch. U.S. consumption of cement, one of the materials used to make concrete, was flat in 2006 at 124.3 million metric tons, according to Ken Simonson, chief economist with the Associated General Contractors of America. Still, Simonson said he expected commercial construction to take up the slack in 2007.
“Highway construction ... will continue to increase and I think there will be additional construction in hospitals, hotels, schools
If successful, the Rinker deal would mark the 17th major acquisition for Cemex since the late 1980s. Under the leadership of the Stanford-educated Zambrano, the company has vaulted from a regional Mexican company to a global powerhouse with 50,000 employees and operations in more than 50 countries.
The company posted 2006 revenue of $18.2 billion and net income of $2.4 billion. Cemex’s U.S.-traded shares rose $1.99 to $35.32 on Tuesday while Rinker’s rose $3.25 to $78.55.
