We end 2023 with the news that CRH and Barro Group are preparing to acquire AdBri in Australia. The two companies have teamed up to buy all the ordinary shares in the building materials company that they do not already own for about US$750m. Barro already owns a 43% stake in AdBri and CRH owns just under 5% via a cash settled derivative. The plan is for CRH to buy the remaining shares so it ends up with a 57% holding in total. It requires shareholder approval at AdBri, regulatory consent and other conditions to be met to move forward.
Barro Group has been increasing its stake gradually in AdBri over the last 25 years. It hit 43% in 2019 and subsequently the Australian Competition and Consumer Commission (ACCC) investigated it. Barro Group’s course was cleared in 2020, with the ACCC determining that the acquisition would not ‘substantially lessen’ competition in the market between the two companies that overlap for the supply of cement, ready-mixed concrete and aggregates. It also found Barro and AdBri would continue to face competition locally from Boral, Holcim and Hanson. However the ACCC added that it might reopen its investigation if it received further information that altered its conclusion at that time.
The dynamic between Barro Group and AdBri is complicated because they are, at present, both partners and rivals. Barro owns a significant minority stake in AdBri, and its managing director, Raymond Barro, became the chair of the latter company in 2019. The two companies operate a joint venture, Independent Cement and Lime, which distributes cement and lime in Victoria and New South Wales, and runs a slag cement grinding plant in Melbourne. They sell goods to each other too. Yet Barro Group and AdBri also compete against each other, principally in the sale of concrete. Comments made by Raymond Barro to the Australian Financial Review newspaper indicate that this competition looks set to continue even if CRH and Barro Group buy AdBri, given the family ownership structure of the former company. To this end AdBri set up a governance framework for its board in 2015 in part to handle the interaction between the business interests of itself and Barro Group, and this was further revised in 2019. Due to this convoluted relationship, it set up an independent board committee to assess the current proposal from CRH and Barro Group with Barro family nominee directors removed from the consideration process. It then approved the proposal to the next step of negotiations.
The general consensus is that the CRH-Barro Group deal looks likely to succeed. CRH has a limited presence in Australia and Barro Group’s ownership of AdBri doesn’t seem to change much under the limited details released publicly about the proposal. Potential problems could arise from a rival bidder, if the ACCC decided to re-evaluate the situation or if the Foreign Investment Review Board became involved, but we’ll have to wait and see about these. AdBri owns two of the country’s five clinker plants, both in South Australia. Subsidiary Cockburn Cement also used to produce clinker at its Munster plant in Western Australia but this moved over to grinding-only in the mid-2010s. The company also runs three grinding plants. One of these, Cockburn Cement’s Kwinana plant, has been undergoing a costly upgrade project that overshot its original estimate. Purely in terms of active integrated cement production capacity, this places the deal at US$875/t, a high figure but not as much as CRH stumped up to buy Martin Marietta Materials’ South Texas business in November 2023.
This then leads to how CRH and Barro Group might interact running the business in the future. CRH is by far the bigger company, in charge of a multinational building materials concern, and among the world’s largest producers of cement and concrete outside of China. Its decision to make a large acquisition outside of Europe and North America marks a turning point in its growth strategy since the late 2010s. In a statement, CRH’s head Albert Manifold was quick to compare how Australia was “similar in nature to the Southern US and Central and Eastern Europe where we have a significant presence.” Barro Group, meanwhile, has doggedly been taking over AdBri bit by bit over a quarter of a century. What it gains from the current proposal is mostly unknown, but simplifying the ownership structure and delisting from the Australian Stock Exchange could offer a number of advantages to it. Their ambitions appear aligned for the moment but this may not stay the case forever.
That’s it from Global Cement Weekly for 2023. Enjoy the seasonal break if you have one. Global Cement Weekly will return on 3 January 2024.
