The UK papers are full of news and debate about quantitative easing. At first sight one might be forgiven for thinking this was a new type of laxative but the reality is that this is pure financial jargon for printing money – except in todays hi-tech world one doesn’t print money any more, one apparently creates instant money electronically by adding (say) 150 billion to the US Federal Reserve, or the Bank of England’s balance sheet and there you have it – the country is 150 billion richer, which the Central Bank then spends quickly, before it disappears again, buying up financial assets, government bonds, toxic assets, etc. In turn, this same virtual money then filters down through the banking system, individual bank reserves become more secure, these banks then lend out that extra money to businesses and consumers, the money in general circulation goes up. Better still the velocity of money going round the economy increases (for any economists reading!) and we all become better off. So far so good? Like it or not, this is, apparently, the only thing left in our financial armoury to fight a doomsday depression scenario, now we have reached almost zero interest rates.

I much prefer the alternative option where everybody in the western world gets  5000 dollars/UK£/Euros put into their bank accounts which they then spend on more unnecessary consumer items. Businesses prosper and better still, all those millions of workers in China who now make everything we buy, remain in full-time employment. As a further lift to global morale, a much greater humiliation of at least 25 of the world’s leading bankers, or even Chinese public execution displays of those same miscreants, would no doubt encourage people to smile again and who then would probably spend even more money on more things they don't really need. I could be wrong, but I have the distinct feeling that I am just a few short column inches away from a Nobel economics prize!

But I digress. This month’s main talking point in cement is the future for HeidelbergCement, now being run successfully by Bernd Scheifele and his senior management team, but who are collectively hamstrung by the well-publicized misfortunes of HeidelbergCement’s owners, the Merckle family who between them own a 79.1 per cent stake in the group held through the German Spohn Cement and the family's master holding company VEM. The debt of Spohn Cement, to a large extent financed by the Royal Bank of Scotland (that has since has had to be rescued from bankruptcy by the British government) had already been reduced about a year ago by the sale of a stake in HeidelbergCement to VEM for around €600m, leaving Spohn Cement with a holding of 53.6 per cent. In reality, all that move did was to shift the debt within the Merckle empire, but it does show that the pressures on Merckle were there well before things came to a head following the disastrous gamble in VW shares. Before all that of course, HeidelbergCement itself had geared up heavily, notably through the purchase of Hanson at a high price, in spite of divesting the 35 per cent shareholding in Vicat and of Maxit.  Hopefully the intended sale of the pharmaceutical group Radiopharm should shortly reduce the financial pressure on VEM somewhat.  
 
HeidelbergCement has strong industrial positions, being the global market leader in aggregates, number three in cement and joint number three, with Lafarge, in ready-mixed concrete.  It will not be in the interest of creditors to substantially weaken these positions.  A wholesale sale of the individual cement assets to the highest bidder is thus an unlikely scenario as this would be a value-destroying exercise, in particular in the current market conditions. What the banks might choose to do is to bring in some additional equity capital to put the business on a sounder footing.  This might come from venture capitalists and possibly also from Schwenk family interests, which used to hold an interest in HeidelbergCement of over 22 per cent, but which it reduced to around seven per cent when Dr. Merckle made its offer for the company.  It should also be borne in mind that Dr. Merckle's widow is a member of the Schwenk family.  

That HeidelbergCement's equity base needs to be boosted is beyond doubt. What is less clear at this stage, is whether the equity injection will be made entirely into HeidelbergCement directly or also through VEM or its associates.  Another possible move in this direction would be for Schwenk to purchase HeidelbergCement's interests in the Hungarian and Bosnian subsidiaries, where it is already a substantial shareholder, but that would not provide much money in relation to what is required. 

Holcim has also been mooted as a potential purchaser of some HeidelbergCement group assets, possibly a complete clean-out of the group’s UK operations, but this remain somewhat speculative. Some would also suggest a major Chinese cement group could be another potential buyer – a move given some impetus recently by Guo Wensan, the leader of China’s No 1 cement group Anhui Conch, who expressed an interest in buying some overseas cement assets, especially now that prices are tumbling, and while apparently, he has free access to massive state funding for expansion purposes. Perhaps it's only a matter of time, before the Chinese arrive in Europe, giving a whole new slant on the rather presumptive Western views on the benefits of globalisation.