Cemex bids for RMC
The launching by Cemex of a £2,280m (€3,350m) cash bid for RMC suggests that the Mexican cement giant has given up the expectation of acquiring a majority stake in the leading Indonesian cement producer Semen Gresik, at least in the short to medium term. The agreed cash offer of 855 pence per share represents a 42.7% premium on previous closing prise on the London stock exchange.
By acquiring RMC Group, Cemex is setting off in a different direction. Hitherto, Cemex’ only involvement in Europe, where RMC generates more than 70% of its turnover, has been in Spain, where it is market leader in cement and number three in ready-mixed concrete. Cemex has generally been concentrating on markets where cement is sold in bags and where it can push its brand name, or brand names, and the United States and Spain have been the only notable exceptions to this. RMC, on the other hand and coming from a ready-mixed concrete background, is active in markets where bulk sales dominate. By moving into the more stable markets of Europe in a big way, Cemex should have a more stable cash flow. RMC would also take Cemex into aggregates in a meaningful way for the first time as well and running concrete businesses in their own right rather than as a means of selling cement as in the 19 countries where RMC delivers ready-mixed concrete, Cemex or RMC only produce cement in seven.
Cemex expects the deal to yield synergy benefits of around €160m per annum by 2007 and by taking on RMC, the group’s cement trading activities should grow considerably, though high freight rates and the distance to the cement works would limit Cemex’ ability to supply RMC’s structural shortage of cement from its own sources. The exception here is the United States, where Cemex is an important producer of cement. That said, the MARY NOUR saga could well lead the authorities in Europe to take a closer look at Cemex’ trading practices and possibly impose further conditions in some eastern European markets where RMC has a strong presence in cement.
