Holcim cements position in Australia and China

Swiss cement company Holcim announced yesterday it will buy Cemex Australia for A$2.02 billion ($1.61 million) and invest Rmb1.6 billion ($234 million) in its Chinese affiliate Huaxin Cement, financing the combined outlay with a SFr2 billion ($1.8 billion) rights issue.

Cemex Australia is a unit of Mexico cement producer Cemex, which has operations in more than 50 countries around the world. It has a presence across Australia in aggregates, ready-mix concrete and concrete products with a total of 348 facilities with a strong position in Queensland, New South Wales and Victoria, as well as in Tasmania and in the Western Australian mining belt. It owns 83 aggregate quarries with reserves of aggregates estimated at 1 billion tonnes, plus 249 ready-mix concrete plants and 16 pipe and concrete product plants.

Zurich-headquartered Holcim has struck the deal at a firm value of A$2.02 billion, which translates into an Ebitda multiple of 6.6 times, based on expected 2009 earnings. Based on trailing 2008 earnings, Holcim is paying a multiple of 6.45 times. In 2008, Cemex Australia had sales of approximately A$1.86 billion.

As part of the deal, Holcim will also acquire Cemex Australia's 25% ownership in Cement Australia, the country's largest cement producer, which has an annual production capacity of 5.1 million tonnes. Holcim already has a 50% shareholding in Cement Australia, which operates four cement plants and one grinding plant as well as several terminals and distribution centres along the east coast of Australia and in Tasmania. In 2008, Cement Australia had sales of A$995 million on which it earned an Ebitda of A$196 million.

The deal is subject to due diligence and regulatory approvals in Australia. It is expected to close within six months.

Cemex was advised on the sale of its Australian business by BBVA, BNP Paribas, Citi, HSBC, Banco Santander and Royal Bank of Scotland.

Cemex acquired Australia's Rinker Group through a hostile takeover in October 2006, on which the Mexican firm was advised by Citi and J.P. Morgan. Cemex initially offered $12.8 billion for Rinker but over the course of the next six months it increased its offer by 20% to $15.3 billion to win over Rinker shareholders. The deal valued the Australian construction materials company, which was advised by UBS, at 10.4 times Ebitda based on earnings for calendar 2006. Cemex then renamed the company Cemex Australia.

In March 2008 Cemex said it was capturing cost synergies of around $400 million annually from the integration of Rinker, up from an estimate of $130 million when it launched the takeover.