Displaying items by tag: Acquisition
CRH to acquire Barrette Outdoor Living for US$1.9bn
08 June 2022Canada: CRH has signed an agreement to acquire residential railings and fencing producer Barrette Outdoor Living. The value of the deal is US$1.9bn. CRH will finance the acquisition through its existing financial resources, and expects it to conclude in the second half of 2022.
China: Huaxin Cement has signed a capital injection agreement with Huangshi State-owned Assets Company to acquire a 5.2% stake in the latter for US$150m. The producer says that it will strengthen its cooperation with Huangshi State-owned Assets Company in order to accelerate development of its non-cement business. It said that the transaction will also improve its innovation capabilities, helping it to achieve a low-carbon transformation. Huangshi State-owned Assets Company indirectly owns a 16% share of Huaxin Cement.
India: Holcim India subsidiary ACC has announced that industrial conglomerate Adani Group's open offer for Holcim's Indian business will open on 6 July 2022 and conclude on 19 July 2022. Live Mint News has reported that the parties expect the deal to subsequently close within 2022.
Admixture markets in the US
25 May 2022More mergers and acquisition news emerged this week in the shape of potential buyers for Sika’s US admixtures business. Reporting from Bloomberg revealed that Holcim, HeidelbergCement and Turkey-based Sabancı Holding had all made it, amongst other unnamed companies, to a second round of bidding for the assets. Sika then confirmed this to the Finanz und Wirtschaft newspaper and added that the sale would also relate to Canadian assets as well. The intention here is to bypass the risk of a lengthy competition investigation in the US.
Switzerland-based Sika announced in November 2021 that it had signed a deal to buy MBCC Group from Lone Star Funds, a global private equity firm, for Euro5.2bn. At the time of the announcement Sika said that the transaction was subject to regulatory approval but it added that it was ‘confident’ that all required clearances would be obtained with closure planned for the second half of 2022. Known competition probes are now pending in the UK, Australia and New Zealand. A previous piece from Bloomberg suggested that internal analysis by Sika found that the company might need to divest operations with annual sales of around US$160m with a value of US$400m. However, the latest update suggests a value of up to US$1bn. The US represented US$1.71bn or 18% of Sika’s total group sales in 2021. Sika’s information to shareholders to let them know about the MBCC acquisition in November 2021, showed that MBCC had sales of around US$966m in the Americas in 2021 with 36 production plants. Overall, not just in the US, the deal is expected to change Sika’s technology mix from 40% concrete and cement systems to 49%, with most of the additions coming from concrete applications.
Divestments were always likely in an acquisition this large between competitors with shared geographies. What is interesting here to the cement sector is that the three named interested parties are all cement producers. Holcim is perhaps the least surprising given its size, pivot towards light building materials and the fact that its current head, Jan Jenisch, used to run Sika. If anyone knows how much an admixture company is worth, it’s the guy who ran one five years ago! HeidelbergCement does not have such a large light building materials business footprint but it is demonstrably interested in making heavy building material production more sustainable. Also, as the world’s second largest western multinational cement producer it is likely to be interested in an input market for some of its end products. Sabancı Holding is the outlier in this grouping with a more regional grey cement business based in Turkey, an international white cement business and a diverse set of business interests including finance and energy. Although, even as the smallest of the bunch, it still reported sales revenue of over US$9bn in 2021. One notable absence from the potential contenders list for Sika USA is Cemex. Its Urbanisation Solutions division, which produces admixtures among other products, reported sales of US$1.9bn in 2021 or 13% of the group’s total revenue. US$558m of this was made in the US.
The wider context in the North American admixture market is that the announcement of Sika’s deal with MBCC in November 2021 was followed about a month later when Saint-Gobain said it had entered into a deal to buy GCP Applied Technologies. This followed Saint-Gobain’s acquisition of Chryso in October 2021. However, Saint-Gobain said that the GCP deal would strengthen its position more in North America. Readers can find out more about Saint-Gobain’s ambitions here.
The final word at this stage should go on Lone Star Funds, the current owner of MBCC. Lone Star Funds bought the construction chemicals business from BASF for Euro3.17bn in September 2020. At the time the acquisition closed Saori Dubourg, a member of the board of executive directors of BASF, said “Lone Star has been a professional partner in this transaction and is committed to the future success of the business.” If the reporting is correct, Lone Star Funds is now selling the same business for over Euro5bn. There are two takeaways to consider at this point. One is that the perceived value of products that make cement and concrete more sustainable are growing. The other is that Lone Star Funds timed its acquisition of MBCC from BASF very well.
HeidelbergCement to acquire 50% stake in CBI
20 May 2022Ghana: Heidelberg said that it has signed an agreement with CBI for the acquisition of 50% of the latter’s shares. CBI is the parent company of CBI Ghana, which operates the 0.6Mt/yr Tema grinding plant in Accra. It is in the process of establishing a calcined clay plant at the facility. HeidelbergCement says that it and CBI will explore the possibility of further calcined clay projects in West Africa. Other investors in CBI Ghana include Denmark-based Investeringsfonden for Udviklingslande (IFU) and Norway-based Norfund.
HeidelbergCement’s existing Ghanaian susbidiary Ghacem operates 3Mt/yr-worth of grinding capacity at two plants in Accra and Takoradi.
HeidelbergCement managing board member Hakan Gurdal said “Characterised by high sustained market growth rates, Ghana is one of HeidelbergCement’s core markets in Africa. The new flash calciner in Ghana will be the largest worldwide, with a calcined clay production capacity of more than 400,000t/yr. Start of production is planned for 2024.” Gurdal concluded “We are committed to lowering our CO2 footprint also in emerging markets.”
Holcim agreed to sell its Indian assets to Adani Group this week for US$6.37bn. These include Holcim’s stakes in its local subsidiaries Ambuja Cement and ACC. The deal, if approved by the local competition body, should complete in the second half of 2022. This is one of the larger sales of cement company assets over the last decade. Adani Group, an Indian-based conglomerate with businesses across energy, transport and more, is now poised to become the second largest cement producer in India.
Global Cement Weekly previously covered a potential sale of Ambuja Cement and ACC in April 2022 when the story that Holcim was looking for a buyer first emerged in the Indian press. At the time local press speculated that the sale could generate as much as US$15bn for Holcim. So it is interesting to see that a figure of US$6.37bn has been agreed upon instead, less than half of the speculative figure. Roughly, as ever, this places a value of a little below US$100/t of cement production capacity. This seems like a relatively low pricing for these plants by international standards over the last decade. However, this doesn’t take into account many factors such as, for example, the condition of the plants, Holcim’s desire to change its business, the ease of selling up in India all in one go, other non-cement assets and so on. For Adani Group though, buying into heavy building materials production in a large market like India clearly seemed attractive. It is also worth noting that, similar to other cement sector acquisitions recently, here again is a buyer with a background in another carbon-heavy industry buying into another heavy emitter.
Acquirer | Divestor/target | Year | Value | Cement production capacity | Price for cement capacity | Region |
HeidelbergCement | Italcementi | 2016 | US$7.0bn | 70Mt/yr | US$96/t | Europe, Africa, Middle East |
CRH | Lafarge and Holcim | 2015 | US$6.9bn | 36Mt/yr | US$192/t | Europe, Americas, Asia |
Adani Group | Holcim | 2022 | US$6.4bn | 66Mt/yr | US$97/t | India |
CRH | Ash Grove | 2018 | US$3.5bn | 10Mt/yr | US$350/t | US |
UltraTech Cement | Jaiprakash Associates | 2017 | US$2.5bn | 21Mt/yr | US$119/t | India |
Smikom | Eurocement | 2021 | US$2.2bn | 50Mt/yr | US$44/t | Russia, CIS |
Semen Indonesia | LafargeHolcim | 2019 | US$1.8bn | 12Mt/yr | US$150/t | Indonesia |
CSN | Holcim | 2021 | US$1.0bn | 9Mt/yr | US$111/t | Brazil |
Table 1: Selected large scale acquisitions of controlling shares in non-Chinese cement production assets since 2012. Source: Global Cement news and company releases. Italcementi acquisition value reported by Reuters.
Table 1 above provides some historical context to Adani Group’s agreed acquisition by comparing it to other large completed deals in the cement sector over the last decade. Don’t forget that it is only looking at this from the cement sector. This list excludes changes in ownership in the Chinese cement companies in this period because, generally, there has been a government-driven consolidation in the industry through mergers rather than large-scale acquisitions. So, for example, the world’s current biggest cement producer CNBM had a reported production capacity of 350Mt/yr in 2012 and this rose to 514Mt/yr in 2020 as it absorbed other state-owned companies. The big merger it underwent during this time was with China National Materials (Sinoma) in 2018, primarily an engineering company that also produced cement.
The most obvious trend in Table 1 is the journey of Lafarge and Holcim from their merger in 2015 and the gradual realignment of the business subsequently. During this time the company has sold up in large markets outside of its core regions in Europe and North America. Latterly, it has also started to diversify away from heavy into lightweight building materials. One notable ‘nearly happened’ was LafargeHolcim’s attempt to sell its business in the Philippines to San Miguel Corporation for US$2.15bn in 2019. That deal collapsed when the Philippines Competition Authority failed to approve it within a year of its proposal. CRH enlarged itself from assets sold during the creation of LafargeHolcim and then picked up Ash Grove in the US in 2018. CRH’s head Albert Manifold memorably said in 2018 that his company was focusing on markets in developed countries and CRH’s large-scale acquisitions have largely followed this.
As for the others, HeidelbergCement’s purchase of Italcementi in 2016 almost appeared as a riposte to the formation of LafargeHolcim, albeit on a slightly smaller scale. It confirmed HeidelbergCement’s place as the world’s second largest non-Chinese cement producer. It is also one of the minority of truly multinational acquisitions on this list. Unlike LafargeHolcim and now Holcim though, HeidelbergCement hasn’t exhibited a desire to downsize or diversify at quite the same speed. UltraTech Cement’s acquisition of Jaiprakash Associates in 2017 confirmed its place as the largest Indian producer. That deal was publicly one of the longer lasting one as it originally started out in at least 2014 on a smaller scale and was later slowed down by the Mines and Minerals (Development and Regulation) (MMDR) Amendment Act. Smikon’s purchase of Eurocement in 2021 almost looks like part of the isolation of the Russian economy, especially with the benefit of hindsight given by the invasion of the Ukraine in early 2022.
Mega-deals have lots of moving parts but two of the most tangible to broader audiences are the price and the timing. Cemex infamously got both of these wrong with its acquisition of Rinker in 2007 as it paid high just as the US subprime mortgage crisis started a wider global financial one. This was despite Cemex’s emergence over the previous 15 years as a multinational force to be reckoned with due in part to the so-called ‘Cemex Way’ approach to management, acquisitions and integration. Clear winners from the big acquisitions over the last decade are harder to spot but CRH and UltraTech Cement look strong so far. Adani Group has certainly picked a lively time to make a purchase on this scale following a global pandemic with ongoing global supply chain issues and disruptions to energy and food markets.
Malaysia: Investment holding company Borneo Oil has concluded a deal with MT 23 Resources for the acquisition of a 22% stake in Makin Teguh.The deal will bring Borneo Oil's total holding in the cement company to 38%. Makin Teguh is in the process of establishing an integrated cement plant in the state of Sabah.
Borneo Oil said “There is synergy between the group's existing limestone quarrying business operations and Makin Teguh's clinker and cement plant. The outlook for Sabah's clinker and cement industry is favourable, given the high cement prices in Sabah compared with the rest of Malaysia and its proximity to the East ASEAN Growth Area." It added “The Covid-19 shutdowns in 2020 and 2021 created an unprecedented urgency for Sabah to become more self-reliant in various sectors of economic importance. Sabah can no longer afford to rely on 100% imported clinker and cement, and, therefore, the setting up of a clinker and cement plant in Sabah is timely.”
Holcim to acquire Izolbet
12 May 2022Poland: Holcim has entered into an agreement to acquire waterproofing, adhesives, polystyrene products and plaster producer Izolbet. Izolbet employs 170 people and operates four production plants in Budzyń, Gostynin, Kleszczów and Chmielów, with most of its business in the high-growth repair and refurbishment market. Holcim says that the new acquisition will help to strengthen its footprint in the renovation, thermal insulation and finishing segment.
Europe, Middle East and Africa region head Miljan Gutovic said “Speciality building solutions have been a key focus for expanding Solutions & Products in Europe, notably with the recent acquisitions of PRB Group in France and PTB-Compaktuna in Belgium. I’m excited to be welcoming all of Izolbet’s employees into the Holcim family, to unleash our next chapter of growth together.
Canada: Progressive Planet Solutions has appointed Ian Grant as its chief operating officer. He has been promoted from Vice President of Business Development. In his new role Grant will work with chief executive officer Steve Harpur to oversee operations and development of its micronised mineral technologies in addition to supporting the growth of the company's current business.
In May 2022 Progressive Planet completed the acquisition and integration of Absorbent Products and the expansion of its regenerative fertiliser operations. It also changed the name of its new subsidiary to Progressive Planet Products. As part of his work on the company's plan, Grant will be managing the shutdown of the seasonal regenerative fertiliser pilot plant in Spallumcheen by moving key equipment to expand the full commercial plant in Kamloops. Grant will be based at the company’s new joint head office for Progressive Planet Solutions and Progressive Planet Products in Kamloops.
Progressive Planet sells products with sustainable benefits to the agricultural, construction and industrial sectors including micronised minerals such as a proprietary supplementary cementing material made from recycled glass.
Denmark: GE Renewable Energy has invested in a minority stake in COBOD International. The companies said that the investment will build on their existing relationship since 2019. GE Renewable Energy chose COBOD International as the global market leader in 3D printing technology, which experienced double-digit growth in 2020.
GE Renewable Energy advanced manufacturing technology leader Matteo Bellucci said “This agreement, which will further strengthen our ability to use COBOD’s 3D printing technology and competences in the renewable energy space, is another sign of our commitment to help drive the energy transition by investing in technology that promotes a more sustainable, circular design strategy and helps to create local jobs.” He continued “Since we started cooperating with COBOD, the company has continued to improve their technical competence and innovative solutions, reinforcing the benefits of solidifying the relationship between our companies.”