Holcim Details Expansion, Sets $1.9B Cap Hike
ZURICH Private Placement (Dow Jones)–Cement and building aggregates company Holcim Ltd. announced the $1.63 billion acquisition of the Australian operations of Mexico’s Cemex S.A.B. de C.V. (CX) and said it plans to raise 2 billion Swiss francs ($1.9 billion) to finance its growth and to protect its balance sheet.
At the same time, the Swiss cement giant said it would participate in a private placement (Private Placement Offering) in a Chinese cement company in which it holds a minority stake.
The moves in Australia and China represent a bid by Holcim to expand its business in the faster-growing markets in the Asia-Pacific region.
The expansion plan could put to rest speculation that Holcim may be interested in other deals, such as buying assets from HeidelbergCement AG (HEI.XE).
Cemex Australia, which last year posted sales of A$1.86 billion ($1.5 billion) and earnings before interest, tax, depreciation and amortization of A$13 million, comprises 83 Australian sites to process building materials and 265 concrete plants. It currently employs about 2,800 workers.
The deal also includes Cemex Australia’s 25% stake in Cement Australia, already 50%-owned by Holcim. Cement Australia operates four cement plants and one grinding plant as well as several terminals and distribution centers along the east coast of Australia and in Tasmania.
Analysts welcomed Holcim’s expansion in a region where the company hasn’t been strong.
The transaction will close after regulatory approval and due diligence.
In China, Holcim plans to participate in a private placement of up to CNY4 billion ($585 million) of Huaxin Cement Co. (600801.SH), in which Holcim owns a 39.9% stake. Holcim’s portion in the placement amounts to CNY1.6 billion, or $234 million. The southern Chinese cement maker will use the money to build two plants in new markets and expand capacities in existing markets. Cement capacity of currently 38 million tons per year will be increased by 17 million tons.
The fact that both transactions have to be financed with equity reflected the difficult conditions for the cement industry, analyst Patrick Appenzeller said. He has a neutral rating and a CHF59 price target on Holcim.
In the current market downturn, the cement industry has been hit hard by lower growth expectations and by tough credit conditions.
On the Swiss bourse at 1500 GMT, Holcim shares traded flat at CHF62 while the benchmark SMI index traded down 2%.
Holcim will ask shareholders at an extraordinary meeting due July 8 to approve the capital increase to finance the projects and preserve the company’s liquidity and credit rating.
Holcim plans to issue 55.3 million new shares with a par value of CHF2 each. The transaction is underwritten by global coordinator and book runner UBS AG (UBS).
Trading of subscription rights on the Swiss bourse is expected July 10 to July 16. The first trading day of the new shares is expected July 20.
Key minority shareholder Thomas Schmidheiny, a former Holcim chairman, will participate substantially in the planned capital increase, a spokesman for Schmidheiny said.
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