Displaying items by tag: Merger
Adani aims at Heidelberg Materials in India
09 October 2024Adani Group’s latest target for acquisition in the cement sector was revealed this week to be Heidelberg Materials’ India-based business. The Economic Times newspaper reported that talks have started between the companies with a tentative value of US$1.2bn. As might be expected, Adani Group is said to be keen to close the deal down quickly. It wants to avoid an auction situation where it might face competitors. However, there may be some disagreement about the actual production capacity of Heidelberg Materials’ companies in India. If a deal were finalised, it might be completed by early 2027.
Heidelberg Materials’ capacity in India was listed as 14Mt/yr by the press but this could include the company’s grinding plants as well as its integrated ones. Heidelberg Materials, itself, says it has a capacity of 12.1Mt/yr from three integrated cement plants, four grinding plants and a terminal across 12 states. Data from the Global Cement Directory 2024 suggests that this refers to the group’s integrated cement capacity. The plants are roughly split equally between subsidiaries Heidelberg Materials India and Zuari Cement. Heidelberg Materials entered the Indian market in 2006 when it acquired Mysore Cement, Cochin Cement and established a joint-venture with Indorama Cement. It later added Zuari Cement to its portfolio when it bought Italcementi in 2016. The group used to run four integrated plants in India until in May 2024, when it shut down clinker production at its Ammasandra plant in Karnataka, although grinding activity has continued at the site.
Back in 2021 Heidelberg Materials’ CEO Dominik von Achten said that the group had considered selling anything following a business review. "There are no sacred cows. Everything was on the table." Indonesia was generally perceived by analysts as a likely sale target in the developing markets but nothing happened in the end. India wasn’t mentioned at this time, although no doubt it was being considered. Yet Holcim divested its businesses there in 2022. These were picked up by Adani Group for US$6.4bn. This, in turn, kicked off the rivalry in the Indian cement sector between market leader UltraTech Cement and Adani Group. Both companies are now in a race to build production capacity through expansion, new plants and acquisitions.
One reason why Heidelberg Materials may have decided now in particular to talk to Adani Group can be seen in its recent financial reports. In 2023 it said that its “cement and clinker deliveries increased moderately, as massive excess capacities persist in our core markets.” It then followed this up in 2024 by noting that deliveries were slightly down year-on-year in the first half of the year. It blamed this on excess capacity in South India. The subsidiary reported a net loss of €6.3m in 2023. An article by Holtec Consulting in the October 2023 issue of Global Cement Magazine implied that capacity utilisation was 56% in 2023, the lowest of the country’s regions. This is a particular problem for the company given that Zuari Cement is based in the south.
Funnily enough, a sale of 12.1Mt/yr capacity for US$1.2bn suggests a price of US$99/t, a similar figure to what Adani Group paid to buy Holcim’s assets in India in 2022. This may explain why Adani Group is trying to avoid an open sale for the Heidelberg Materials assets. Then again, maybe the market in southern India really is suffering. By comparison, when Adani Group concluded a deal to buy Penna Cements in August 2024 it paid US$1.2bn for an integrated capacity of about 7Mt/yr or around US$170/t. Factor in the low capacity utilisation rate in south India and this potential Adani-Heidelberg Materials deal ends up at roughly the same price.
Something that may help Adani Group reach its goal might be a formal merger between its two main cement companies, Ambuja Cements and ACC. The Mint newspaper reported on it this week, saying that Jefferies and Axis Capital has been hired as an advisor. This certainly makes sense in synergy savings but moving all the mining and leasing rights around might prove cumbersome. Regardless, Adani Group is on an expansion drive, with a capacity of 140Mt/yr targeted by 2028. All the smaller cement companies in the country are potentially targets.
Adani Group may merge Ambuja Cements and ACC
08 October 2024India: Adani Group is considering a merger of Ambuja Cements and ACC into a single entity, Adani Cement, by 2028. Mint News has reported that the group, which began integrating the operations of the two companies recently, may also include Sanghi Industries in the merger. The proposed merger would involve a share swap between the companies, with all existing brand identities retained.
End of an era - Albert Manifold to leave CRH
25 September 2024CRH, formerly Cement Roadstone Holdings, announced this week that CEO Albert Manifold is retiring at the end of 2024. He will be replaced by current chief financial officer Jim Mintern in the role. Manifold will continue to work as an advisor to CRH in 2025. Manifold’s time at the head of CRH marks a decade of considerable change at the group. Crudely, CRH had a market capitalisation of US$19bn at the start of 2014 when Manifold became CEO. At the end of 2023 the group’s market capitalisation was US$50bn.
From a cement sector perspective the big events during Manifold’s tenure include CRH’s acquisition of assets around the world from the Lafarge-Holcim merger in 2015, the purchase of Ash Grove Cement in the US in 2018, the divestment of various businesses in emerging markets and the move of the company’s primary listing to the New York Stock Exchange in 2023. However, at the same time, CRH has been constantly sharpening its portfolio. So, for example, the group bought Germany-based lime and aggregates company Fels in 2017 only to later sell off its European lime business in 2023 and 2024. In the late 2010s the group sold off its US and Europe-based distribution businesses. Then, in 2022, it divested its Building Envelope business. Manifold was also the inaugural president of the Global Cement and Concrete Association (GCCA) when it formed in 2018.
Fairly or unfairly, CRH has given the sense over the last decade of often being ahead of the curve in following the cement markets. After it increased its portfolio when Lafarge and Holcim merged, it sold up relatively quickly in India and Brazil. Famously during an earnings call for CRH’s second quarter results in 2019, Manifold said that the group was prioritising its businesses in the developed world. CRH’s focus on the US in the late 2010s through the acquisition of Ash Grove Cement set it up well for the current strength of the cement market in North America, long before others joined the party. Another striking Manifold statement came at the company’s annual general meeting in 2023 when, in the run-up to the US listing move, he described his company as a ‘de facto’ American company.
Things that may have gone less well for Manifold on the cement side, that we know about, include CRH’s quiet attempt to divest its business in the Philippines in the late 2010s. The company wasn’t alone in trying through. Holcim publicly said that it had signed a deal to sell its local business in 2019 only to declare that it wasn’t happening the following year. Cemex is currently in the process of selling its subsidiary in the country, DMCI Holdings, but it hasn’t concluded yet. More recent acquisitions such as assets from Martin Marietta Materials in Texas in early 2024 and a majority stake in Adbri in Australia are clearly strategic and fit the definition of ‘bolt-on’ but they seem to lack the grand ambition of the earlier big deals.
Questions have also been asked about Manifold’s pay over the years. From 2016 onwards the Institutional Shareholder Services (ISS), for example, has repeatedly raised concerns about executive pay rises at CRH and recommended on occasion that shareholders reject them. Manifold became the highest paid head of an Irish public company and was reportedly the third highest paid CEO on the Financial Times Stock Exchange 100 Index (FTSE 100) in 2022. His response from one interview with the Irish Times newspaper in 2018 was simply: “I’m employed and paid very well to deliver shareholder returns.”
Looking back over the last decade, CRH was well placed to take advantage of the Lafarge-Holcim merger before Manifold started in 2014 but once he was in place it went for it and he led the charge. Yet, the Ash Grove Cement acquisition may prove to be the more momentous move given the current divergence of the European and North American markets. As readers may remember from the time, Summit Materials made a public counter offer but it was rebuffed. Albert Manifold was in charge of CRH and so he takes the credit. These are big shoes to fill. As Richie Boucher, the chair of CRH said in Manifold’s outgoing statement, “Under Albert’s leadership CRH has delivered superior growth and performance with consistently improving profitability, cash generation and returns.”
Saudi cement companies explore mergers amid market tension
13 September 2024Saudi Arabia: The crowded cement sector in Saudi Arabia is experiencing tensions due to its varying market shares, according to Majed Al Osailan, vice chair of the National Cement Committee. He noted that despite initial slow demand, renewed spending on construction has led to a shift, with most companies now able to meet market needs. The cement sector saw its first merger between Qassim Cement and Hail Cement, according to Argaam news, with another planned between City Cement and Umm Al-Qura Cement. NCC chair Badr Johar said that demand for cement is expected to strengthen substantially from late September 2024 to February 2025.
Namibia: The Namibian Competition Commission (NaCC) has imposed a US$269m fine on two companies for completing a merger without prior approval. The acquisition of Hong Xiang Holdings’ shares by Wang Zhongke from Fan Qingmei led to the companies being fined after an investigation found that the merger would create a monopoly in the cement market. NaCC spokesperson Dina Gowases stated that the merger failed to meet the notification requirements under the Competition Act, aimed at safeguarding competitive markets crucial for the construction industry and the national economy. The settlement also requires the companies to implement a competition law compliance programme in Namibia.
JK Lakshmi Cement to merge subsidiaries
01 August 2024India: JK Lakshmi Cement board has approved a corporate restructuring to merge three subsidiaries: Udaipur Cement Works, Hansdeep Industries and Trading, and Hidrive Developers and Industries. The merger is due for completion on 1 April 2025.
Saudi Arabia: Southern Province Cement and Yanbu Cement have signed a non-binding memorandum of understanding to evaluate a potential merger. The due diligence process will assess various aspects including operational, technical, financial, legal and actuarial factors, according to Mubasher.
The memorandum was signed on 23 June 2024 and is set to expire in 12 months unless a merger agreement is reached beforehand. The feasibility of the merger will depend on agreement on final terms, regulatory approvals and endorsements from both companies' general assemblies.
Summit Materials raises full-year sales in 2023
16 February 2024US: Summit Materials has published its financial results for 2023, its last full year prior to its merger with Argos North America on 15 January 2024. The building materials producer’s sales rose by 10% year-on-year to US$2.4bn, while its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 18% to US$578m. Cement contributed 16% of sales revenue, at US$383m, up by 7%. This was despite a 7% decline in sales volumes.
President and chief executive officer Anne Noonan said "Summit is at an exciting and pivotal point in our company’s history. Our team has effectively capitalised on dynamic yet constructive market conditions to drive record revenue and profitability.” She continued “We're building on our record-setting performance by swiftly and safely advancing our Argos integration – a move that we expect will only strengthen our materials-led business. For 2024, with an improved footprint and increased scale, we anticipate delivering another year of strong growth and returns. Our positive outlook is supported by robust commercial conditions, an improving demand backdrop and a full set of growth opportunities that are unique to Summit Materials. Crucially, our high-quality execution, financial performance and strategic focus has afforded us the balance sheet flexibility to continue our pursuit of value-accretive capital allocation priorities. Today and moving forward, we firmly believe Summit is very well-positioned to generate superior value creation for our shareholders."
India: Sanghi Industries has received shareholder approval to supply its cement and clinker to ACC and Ambuja Cements. Additionally, Sanghi Industries will begin to purchase of coal from fellow Adani Group subsidiary Adani Enterprises, according to the Economic Times newspaper. Under the new arrangements, ACC and Ambuja Cements will sell Sanghi Industries’ cement and clinker under their own brands, at a price 10% above production cost. This is reportedly below industry pricing standards for comparable deals of 25 - 30% higher pricing over costs.
Adani Group subsidiary Ambuja Cements acquired a 57% stake in Sanghi Industries on 5 December 2023.
Summit Materials and Cementos Argos complete US merger
15 January 2024US: Summit Materials and Cementos Argos have successfully combined their operations in the US under a single entity. Summit Materials acquired Argos North America Corp. for US$1.2bn, and conversely issued 31% of its shares to Cementos Argos. Summit Materials expects to derive US$100m in additional earnings before interest, taxation, depreciation and amortisation (EBITDA) through the deal. Three representatives of Colombia-based Grupo Argos will sit on the board of up to 11 directors of the new combined entity.
Cementos Argos CEO Juan Esteban Calle said "The combination with Summit Materials, which had the resounding support of its shareholders, allows us to begin a new chapter in the successful history of our presence in the US, and is built on shared values, strategic vision and complementary capabilities.” He added “This new milestone consolidates our objective of continuing to expand our presence in the most attractive construction materials industry in the world for the benefit of our shareholders and all interest groups."