Cemex SA may decide to dispose in the medium term of the German operations of the UK’s RMC Group PLC, after the Mexican cement maker agreed to sell two US plants, analysts said. The sale of two cement plants located in the Great Lakes region to the Brazilian company Votorantim Cimentos, for US$400m was the first sale of cement assets by Cemex since 1998, analysts noted. The two plants, located in Charlevoix and Dixon-Marquette, account for nearly 14 per cent of Cemex’s US production capacity, and, according to BBVA Securities’s estimates, half of that will be offset immediately by the acquisition of RMC.
Cemex announced the acquisition of RMC at the end of September. The transaction is not closed yet. Merrill Lynch analyst Carlos Peyrelongue said in a note that he would not rule out further divestments in Europe in the next eighteen months. "In our opinion, Cemex will also evaluate in detail the RMC portfolio to find other potential divestitures. "Mature markets like Germany, where Cemex today has no operations and scarce synergies with the rest of its operations, could be divested in the future." Peyrelongue stressed that other large cement players in Germany might be able to extract more value from RMC’s operations in Germany than Cemex.
Commenting on the sale of the two US cement plants, UBS Warburg analyst Gordon Lee said that "it is unusual for Cemex to be active on the sell side of an M&A transaction". "However, the acquisition of RMC might result in more assets sales as there are a number of assets that could be considered outside geographies that are core to Cemex that could be salable," Lee said, citing Germany as an example. He noted that Cemex is unlikely to be willing to speak of divestments of RMC assets at this point as the transaction has not yet closed and since the potentially thorny process of integrating RMC with its sizeable labour force is just beginning. However, the US disposals might signal a greater disposition by Cemex to sell off assets that it does not consider core, which could be positive from the standpoint of regaining financial flexibility and its operating focus post-RMC at a quicker pace than presently expected, Lee concluded.
Analysts welcomed Cemex’s decision to sell the two US plants, noting that it is selling assets in an area of the US where cement consumption is below average, allowing the Mexican company to concentrate its activity in the Sun Belt which is favoured by demographic trends. (AFX News).
