Heidelberg Cement to buy Italcementi

OREANDA-NEWS. July 30, 2015. Heidelberg Cement's acquisition of Italcementi will further consolidate the cement market and concentrate purchasing power among a few fuel buyers.

The German firm's plan to buy the Italian company will solidify it as the world's second largest cement producer, following the combination of market leaders France's Lafarge and Switzerland's Holcim, which closed just two weeks ago.

Heidelberg will initially buy a 45pc stake for a total of about €1.67bn (\\$1.84bn), with the payment including up to 10.5mn Heidelberg shares. It will then seek to take over the remaining stake for the same price of about €10.60/share, or a total of €3.7bn.

Italcementi has struggled in recent years in its home market of Italy as well as in France and other parts of Europe that have been hit by tough economic times. Its business in Egypt has faltered recently as well as a result of fuel shortages, although a transition to using coal and petroleum coke has been helping meet this challenge.

The deal reflects Heidelberg's confidence the cement market in Europe is on track to improve. "With the market recovery gaining traction in southern Europe and the US, it is now the right time for us to accelerate our growth with this transaction," chief executive Bernd Scheifele said.

Italcementi operates in 22 countries, including the US, Canada, India, Morocco and Thailand, with total capacity of around 70mn t/yr of cement.

Heidelberg is already the world's second largest cement producer with around 130mn t/yr of capacity in 40 countries.

The combined company would still only be about half the size of LafargeHolcim, but nevertheless, the acquisition should improve its purchasing power in the petroleum coke market, already dominated by a tight group of a few players.

The deal will also provide growth opportunities for other cement companies, as it includes a plan to dispose some of Italcementi and Heidelberg's overlapping assets in order to smooth the process with competition regulators. Irish building materials producer CRH was able to double its cement production capacity earlier this year by scooping up assets that Lafarge and Holcim needed to dispose of to speed their merger.

The acquisition still must receive approval from competition authorities, particularly in Europe and the US, but Heidelberg expects it to close sometime next year.