Displaying items by tag: Acquisition
HeidelbergCement buys Cementir Italia
20 September 2017Italy: HeidelbergCement’s subsidiary Italcementi has agreed to buy Cementir Italia from Cementir Holding for Euro315m. The acquisition includes all of Cementir Italia’s cement and concrete businesses including the subsidiaries Cementir Sacci and Betontir. The transaction is expected to be completed in early 2018 subject to approval by the Italian Antitrust Authority.
“Cementir Italia provides an ideal industrial and geographic fit that significantly improves our nationwide presence in Italy,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement. “For Italcementi, the acquisition is a unique opportunity to grow and consolidate its position in the Italian market. We see strong recovery potential in southern Europe and especially in Italy over the coming years. With this acquisition we are very well positioned to create value through synergies, efficient processes, and the offer of high-quality and innovative products. The acquisition is part of our strategy of disciplined growth and increasing shareholder returns.”
Cementir Italia’s business includes five integrated cement plants and two cement grinding plants with a total capacity of 5.5Mt/yr, as well as the network of terminals and concrete plants, all operating in Italy. Italcementi will fully integrate the operations into its current network. Minimum annual run-rate cost synergies of Euro25m are expected to be achieved by 2020. The acquisition will be financed with free cash flow. HeidelbergCement intends to pay for the purchase with the disposal of ‘non-core’ assets.
Buzzi Unicem announces purchase of 50% stake in Ecotrade
06 September 2017Italy: Buzzi Unicem has announced that it purchased a 50% stake in Ecotrade in early 2017. Ecotrade supplies industrial byproducts, such as fly ash and blast furnace slags, from power plants and steel mills to the cement industry with deliveries of over 2Mt/yr at its peak. The company is a member of the Italian Register of Environmental Operators and it has a national distribution network in Italy. Buzzi Unicem intends to use Ecotrade’s expertise to expand its operations internally.
Germany: Ireland’s CRH has acquired Fels, a lime and aggregate business, for Euro600m from Xella International. The purchase includes nine production locations in Germany, one in the Czechia and one in the Moscow region of Russia, as well as over 1Bnt of limestone reserves. The assets will be added to CRH’s Europe Heavyside division. The purchase is expected to make CRH the second largest business in the European lime market. The acquisition has been funded by the sale of CRH’s Americas Distribution business to Beacon Roofing Supply for Euro2.2bn.
Hanil Cement completes purchase of Hyundai Cement
18 July 2017South Korea: Hanil Cement has completed its acquisition of Hyundai Cement. A consortium of Hanil Cement and LK Investment Partners paid US$552m for a controlling stake of 85% of Hyundai Cement from 32 creditors, including Korea Development Bank and Hana Financial Investment, according to the Maeil Business Newspaper. The acquisition increases Hanil Cement’s cement production capacity significantly with the addition of two integrated cement plants and other associated units.
Update on Chile
12 July 2017Sad news this week from the Talcahuano cement plant in Chile that is to stop producing clinker. Local media reports that the Cementos Bío Bío unit has decided to import clinker from Asia instead, which will reduce its production costs. At the same time it has laid off a third of its workforce. The plant has been producing cement since 1961.
The decision carries echoes of Holcim New Zealand’s closure of its Westport cement plant in 2016, another unit in a country on the Pacific Rim. However, in that country LafargeHolcim has purposely moved towards becoming a distribution company by opening import terminals and depots. Plus the local subsidiary benefits from the cement-trading arm of a multinational company. By contrast, local producer Cementos Bío Bío still retains two integrated plants and a grinding plant in Chile. Following the closure its production share from integrated plants will drop to 2.4Mt/yr (39%) from 3.2Mt/yr (45%). The country will retain a total production capacity of 6.2Mt/yr from its clinker producing plants.
The timing of Cementos Bío Bío’s decision is also interesting given that the Chilean competition authority (TDLC) approved Hurtado Vicuña Group to buy a controlling stake in Cemento Polpaico from LafargeHolcim in early July 2017. The deal was originally announced in October 2016 to sell LafargeHolcim’s 54.3% stake in Cemento Polpaico for US$225m. The sale includes one integrated plant with a cement production capacity of 2.3Mt/yr and two grinding plants. Hurtado Vicuña has not been required by the regulator to sell any of its cement units but it has been asked to sell parts of its concrete business and to abide to a ban on repurchasing the assets within 10 years. Hurtado Vicuña owns Cementos BSA, a subsidiary that runs the El Bosque cement grinding plant in Santiago and it has just started-up production at a new 0.95Mt/yr grinding plant at Quilicura, also near the capital.
In its 2016 annual report LafargeHolcim reported that cement sales volumes of cement fell in Chile due to a fall in the residential construction market in the second half of the year. However it did manage to raise its operating earnings before interest, taxation, depreciation and amortisation (EBTIDA) off the back of higher prices and lower production costs compared to the previous year. Cementos Bío Bío concurred with this assessment of the market in its 2016 report, lamenting the country’s poor economic growth since 2015 and declines in the mining and construction sectors. Despite this its cement despatches rose very slightly to 1.56Mt in 2016. The big drop in its sales occurred in 2014 when its sales fell by 10% year-on-year to 1.51Mt. More recently, Bío Bío noted a 37% decrease in its operating profit for its cement, concrete and lime division for the first quarter of 2017 due to falling sales volumes and margins in cement and lime. However, it did benefit from falling costs for energy and petcoke inputs. The group also announced plans to sell a minority stake in itself in February 2017.
These stories show another country that is realigning its cement industry to a clinker-rich world market. Chile appears to retain a ‘big three’ group of local clinker producers that has shifted with the rise of Cementos BSA and the departure of LafargeHolcim. However, the market share in the cement grinding business has changed significantly as Cementos BSA has gained both an integrated plant and a more national profile, away from the capital, with its grinding plants. Once the local market picks up it will be interesting to see whether this trend towards clinker import and local grinding continues.
FLSmidth to buy part of Sandvik Mining Systems
12 July 2017Sweden: FLSmidth has signed an agreement to acquire a part of Sandvik Mining Systems. This includes continuous surface mining and minerals handling technologies and competences that are intended to strengthen the group's core minerals business. The acquisition will increase FLSmidth’s coverage of the full mining value chain, from the primary crushing point in the mining pit and the transport from mine to plant all the way through the minerals processing plant to the handling of tailings.
FLSmidth will provide project management and aftermarket services to Sandvik on the majority of on-going projects to be delivered during 2017 - 2019. The agreement is subject to certain conditions, including regulatory authority clearance, and closing is expected by the end of 2017.
Timken to buy India’s ABC Bearings
07 July 2017India: Timken India, a subsidiary of the US-based Timken Company, has entered into a definitive agreement to acquire ABC Bearings, a manufacturer of tapered, cylindrical and spherical roller bearings and slewing rings. The deal has been structured as a merger of ABC Bearings into Timken India. It is expected to take at least six months to complete as clearances from various authorities are sought.
"Timken is a leader in the growing Indian bearing market, and the acquisition of ABC Bearings will expand our capacity, our customer base and our locally produced product breadth," said Richard G Kyle, Timken president and chief executive officer.
UltraTech Cement seals the deal
05 July 2017Congratulations are due to India’s UltraTech Cement this week for finally completing its US$2.5bn asset purchase from Jaiprakash Associates. The deal has been around in some form or another since at least 2014 when UltraTech arranged to buy two cement plants in Madhya Pradesh for around US$750m. That deal, publicly at least, became a victim of the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act. The Bombay High Court eventually rejected it in early 2016 after a period of delays. However, the deal bounced back in a much larger form around the same time and since then everything has gone relatively smoothly.
As chairman Kumar Mangalam Birla put it in his letter to shareholders in the company’s 2016 – 2017 annual report the, “move is essentially for geographic market expansion.” He then went on to mention all the usual keywords like ‘synergy’ and ‘economies of scale’ that you expect from an acquisition. Quite rightly he finished with, “It is with great pride that I record, that UltraTech is the largest cement player in India and the fifth largest on the world stage.” On that last point he meant outside of China but UltraTech does have a small number of assets outside of India, notably in the UAE, Bahrain, Oman and Bangladesh, hinting at an international future for the cement producer.
Map 1: UltraTech Cement’s plants in India. Source: UltraTech Cement Corporate Dossier, January 2017.
To give a scale of the deal, UltraTech has increased its number of integrated cement plants in India to 18 from 12 and its cement grinding plants to 21 from 16. Its overall cement production capacity will increase by nearly 40% to 91.4Mt/yr from 66.3Mt/yr. The new assets are in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh. The main regions that will benefit are the North, Central and South zones. In particular the Central Zone will see its capacity jump to 21.1Mt/yr from 6.2Mt/yr. This area also includes a new 3.5Mt/yr plant at Dhar in Madhya Pradesh that is scheduled for commercial production in late 2019.
The completion of the Jaiprakash Associates deal was followed by the introduction at the start of July 2017 of the Goods and Services Tax (GST), a rationalisation of some of the country’s central and state taxes. UltraTech promptly said it had reduced its product prices by 2 – 3% in light of tax reductions under the new regime. Some producers were warning of a rise in cement prices in the run-up to the introduction of the GST and the Cement Manufactures’ Association said that the new tax rate was insufficient. However, UltraTech said that the new tax rate of 28% was better than 30 – 31% previously. Other Indian producers also reduced their prices this week following the introduction of the GST.
UltraTech’s expansion and the start of the new tax scheme auger well for the Indian cement industry in 2017. Demonetisation knocked cement production at the start of the year and it may have lowered UltraTech’s capacity utilisation rate as well as reducing domestic sales by cutting housing demand. However, sector rationalisation and a simpler tax approach should help to remedy this. Not all government interaction has been helpful to the cement industry in recent years as the MMDR amendment and demonetisation show but the signs are promising.
Roll on the next set of financial reports.
Buzzi Unicem completes acquisition of Zillo Group
04 July 2017Italy: Buzzi Unicem has completed its acquisition of Zillo Group with its acquisition of the remaining 52.1% of the share capital of Cementizillo. Following the acquisition it now owns 100% of the company. The agreement was originally announced in mid-June 2017. Buzzi Unicem has paid Euro19m plus 450,000 shares in Buzzi Unicem for its purchase of the majority stake in Cementizillo. Further payments will follow with an additional variable payment of up to Euro21m depending on the average price of Buzzi Unicem cement in Italy from 2017 to 2020.
Chile: Hurtado Vicuña Group has been cleared by the Chilean competition authority (TDLC) to buy a controlling stake in Cemento Polpaico from LafargeHolcim. However, it will be required to sell assets from its concrete business worth up to an estimated US$90m, according to the Diario Financiero newspaper. The agreement also includes other measures such as a ban on repurchasing assets within 10 years. Hurtado Vicuña and its subsidiary Inversiones Caburga operate Cementos Bicentenario (BSA). It agreed to buy Cemento Polpaico in October 2016.