Cemex of Mexico became the world’s largest supplier of building materials Thursday after it won a majority stake in Australia’s Rinker Group Ltd., overcoming concerns of potential dominance in some U.S. markets.
Cemex announced it had won acceptance of its $14.3-billion takeover bid from shareholders representing 50.3% of Rinker stock.
The buyout -- which comes as Dutch firm Mittal Steel Co. completes its acquisition of Luxembourg-based Arcelor to create the world’s biggest steelmaker -- marks the latest in a wave of rising business conglomerates with roots in the developing world.
Cemex and other third-world conglomerates such as Mittal, Brazil’s Companhia Vale do Rio Doce and India’s Tata Group started in protected markets as former state monopolies or dominant companies. But they are now turning the tables, snapping up companies in the developed world.
Analysts say Cemex and its peers have proved that management ability and access to capital are now spread much more equally across the globe than in the last century, when American and European firms were the only real transnationals.
But they also caution that management teams accustomed to being big fish in small ponds must still prove they can assimilate the big acquisitions and face tough global competition and potential market downturns that humbled many of their First World counterparts.
“I don’t think they can just transfer strategies, and that’s the challenge, because in some measure they have all grown up in protected markets,” said Raul Feliz of Mexico’s Center for Economic Research and Teaching, an academic think tank. “Their monopolistic power has allowed them to generate cash flows they’re using now.”
Rinker has already warned that its fiscal 2008 earnings may drop by 10% because of a housing slump in the United States, where it makes 80% of its profit.
The acquisition of Rinker will boost Cemex’s annual sales of $18.2 billion by $5 billion, putting it ahead of France’s LaFarge, generally considered the largest building materials company with $21.4 billion a year in sales.
The combined company will have 41% of its business in the U.S. and 24% in Mexico.
The U.S. Justice Department said it would allow the deal to proceed only if Cemex sells 39 concrete and aggregate facilities in Arizona and Florida to avoid market dominance.