Lafarge SA has acquired Egypt’s Orascom Construction Industries Cement group for EUR8.8bn.
The purchase will boost Lafarge’s access to the oil-fed construction boom in the Gulf region and the fast growth offered by emerging market economies. It joins a growing number of French companies expanding in North Africa.
In a statement Monday, Lafarge said it expects the majority of company profits to come from emerging markets by 2010.
The deal values Orascom Cement at EUR8.8bn, with an assumption of EUR1.4bn in net debt, Lafarge said.
The deal will be financed through EUR6.0bn of debt and the issuance to Nassef Sawiris, who is the majority shareholder with his family of Orascom construction industries, of 22.5 million new Lafarge shares at EUR125 per share, representing a total of EUR2.8bn.
Nassef Sawiris will obtain an 11.4% stake in Lafarge, the company said, which he has agreed to hold for four years.
Lafarge said it expects the acquisition to unlock synergies of more than EUR150m a year and be accretive to earnings per share from the first year.
A Paris-based trader said the deal at first glance looks to be positive for Lafarge, citing synergies. The price paid by Lafarge "doesn’t seem so expensive considering the (potential) outcome from the transaction," he added.
In a conference call, Lafarge’s Chief Executive Bruno Lafont said the deal is expected to be positive for earnings as soon as 2008.
Lafont also said the company’s ratio of net debt to earnings before interest tax, depreciation and amortization should be below 3 by the end of next year and between 2 and 2.5 by 2010.