Germany/Italy: Germany's HeidelbergCement plans to buy rival Italcementi for Euro3.7bn as it puts its repaired balance sheet to work to follow LafargeHolcim down the path of consolidation, according to Bloomberg.
HeidelbergCement has initially bought Italmobiliare SpA's 45% stake, paying Euro10.6/share or Euro1.67bn total in stock and cash. This transaction was initiated on 28 July 2015 and is subject to approval by competition authorities. HeidelbergCement will next offer the same price for each share held by outstanding investors, once the first transaction has been cleared. The price offered for each share is 61% higher than Italcementi's closing price before the deal was announced.
The deal represents HeidelbergCement's biggest since the Euro11.2bn acquisition of Hanson in 2009. CEO Bernd Scheifele has managed to give the company more breathing space from the debt built up in that ill-timed takeover, allowing him to pursue an expansion just weeks after Holcim and Lafarge completed their industry-transforming merger of the biggest cement companies in Switzerland and France. Analysts have suggested that the Italcementi acquisition could backfire and hurt earnings.
The acquisition of Italcementi will expand HeidelbergCement's operations in Mediterranean countries such as Italy and Egypt as well as in France and Belgium, which combined represent the Bergamo, Italy-based company's biggest market. "With the market recovery gaining traction in southern Europe and the US, it is now the right time for us to accelerate our growth," said Scheifele. The deal gives HeidelbergCement the greatest boost in the Middle East and Africa, doubling its market share in that region to a similar level to Dangote Cement, according to data compiled by Bloomberg Intelligence. However, it will still lag behind LafargeHolcim there.
HeidelbergCement expects annual synergies of Euro175m by 2018 from the acquisition. The deal will initially be financed through cash and fully underwritten bridge financing of Euro4.4bn by Deutsche Bank and Morgan Stanley. That will partially be repaid by Euro1bn in asset sales and new debt sales. As a result of the takeover, HeidelbergCement expects revenue to top Euro20bn 2020, with earnings before interest, taxes, depreciation and amortization of more than Euro5bn. That compares with earlier goals of Euro17bn and Euro4bn respectively. HeidelbergCement's 2014 revenue was Euro12.7bn, while Italcementi generated Euro4.2bn.