Irish cement manufacturer CRH Plc has said it will acquire certain assets of Swiss competitor Holcim and French building materials giant Lafarge for a total consideration of €6.5 billion ($7.34 billion), in a move that will make the Irish firm the world's
third-largest cement firm by market value.
The assets being acquired by CRH would comprise operations across Europe, the US, Canada, Brazil and the Philippines. These assets generated estimated sales of €5.2 billion in 2014 and operating profit of €744 million, CRH said in the statement.
All the three firms, CRH, Holcim and Lafarge have operations in India.
Considering that Holcim with control of ACC and Ambuja Cement is almost neck to neck with UltraTech as the largest cement group in India, it is interesting that the asset sale does not include the local operations.
Lafarge is present with its own firm which is backed by PE firm Baring PE Asia.
As per reports, Indian competition watchdog CCI is yet to give its green signal to the deal.
An emailed query to CRH seeking further details did not elicit any response.
CRH has an equal equity joint venture with Hyderabad-based My Home Group under My Home Industries Ltd (MHIL). This JV firm had acquired Sree Jayajothi Cements Ltd in August 2013. CRH was also in the fray to buy certain asset of Jaypee Cement but the deal was later clinched by AV Birla group firm UltraTech.
Meanwhile, the sale of the assets by Holcim and Lafarge is part of a sell-off required to get approval from antitrust authorities in Europe and elsewhere for their proposed merger announced in April last year to create the world's largest cement manufacturer with $40 billion in annual revenue.
Lafarge and Holcim expect the merger to be completed in the first half, once Holcim shareholders approve the deal at a meeting and Lafarge investors tender their shares.
At the time of announcement of merger, Lafarge and Holcim had said the two companies are looking to sell overlapping assets that represented about €5 billion in revenue to ensure regulatory approval for their merger.
“This transaction represents a significant value creation opportunity for CRH. We are acquiring a quality portfolio of assets, which complement our existing positions, at an attractive valuation and at the right point of the cycle. The acquisition strengthens our presence in important markets across North America, Western, Central and Eastern Europe as well as providing new platforms for growth in emerging markets,” CRH chief executive Albert Manifold said.
CRH had a net debt of around €2.5 billion or 1.5 times earnings at the end of 2014 and it expects this to rise to 3.2 times earnings on the back of the deal.
CRH will finance the purchase via €2 billion in cash; and is also planning a 9.99 per cent share placing to institutional investors, which will be organised and managed by UBS, JP Morgan Securities Plc, Merrill Lynch International and J&E Davy.
The company, which was built in 1970 through a merger of two Irish companies, operates in 35 countries with about 76,000 people and €18 billion in annual sales.
Holcim and Lafarge were advised by Credit Suisse Group AG and HSBC Holdings Plc as well as BNP Paribas SA and Morgan Stanley. CRH worked with UBS, Bank of America Merrill Lynch, JPMorgan Chase & Co., and Davy and Goodbody.
(Edited by Joby Puthuparampil Johnson)