German cement maker HeidelbergCement said on Tuesday it had signed an agreement to buy a 45% stake in its smaller Italian rival, Italcementi, in a deal valued at about 1.67 billion euros. The acquisition will be made in cash and stock.
It is worth mentioning that just last year, the world's top two cement and concrete producers, Lafarge of France and Holcim of Switzerland, just announced the terms of the merger agreement.
Italmobiliare said it would sell a 45% stake in Italcementi, which it controls, to HeidelbergCement of Germany for at least 7.75 million shares at 10.6 euros a share through an issue of new shares. The combination of the two companies makes it the second largest company in the cement industry and the third largest company in the concrete industry.
The completion of the deal with Unicom will automatically trigger Heidelberg's public offer to buy back the remaining shares in Cimentalia, which should be at the same price of 10.60 euros per share, provided, however, that the deal is approved by the US and European antitrust authorities.
The merger of Lafarge of France and Holcim of Switzerland, the world's two largest producers of cement and concrete, will create an industry giant with a combined annual revenue of 40 billion euros.
By comparison, in 2014 Heidelberg had a turnover of 12.6 billion euros, while Italcementi had a turnover of 4.16 billion euros.
Heidelberg, which is gradually reducing its debt, said last month that it would increase returns to shareholders and was cautious about the terms of the acquisition.
Italcementi, controlled by Italy's Pesenti family, has a market capitalisation of about 2.3 billion euros, while HeidelbergCement has a market capitalisation of 13.3 billion euros.
Italcementi, founded 151 years ago, now operates in 20 countries around the world and is a "leader" in Egypt. After years of losses, analysts expect the company to make a modest net profit this year.
Heidelberg raised its medium-term forecast to reflect the positive impact of the new acquisition. The company currently aims to achieve operating income of more than 20 billion euros and total operating profit (EBITDA) of more than 5 billion euros by 2019. The company's previous operating income and total operating profit were 17 billion and 4 billion, respectively.
The German group also reported its second-quarter results, with turnover of 3.6 billion euros and operating profit up 15% to 752 million euros before depreciation, thanks to an increase in its prices, as well as lower costs for its costs and its ingredients. Analysts at Heidelberg itself had expected a value of 749 million.
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