The agreed bid by HeidelbergCement for Hanson will create the world’s largest aggregates producer and the at the bid price of 1,100 pence values Hanson at some EUR11,700m, a record price for a building materials company. The price represent an historic exit multiple of 12 times, which compares favourably with the recent major deals in the sector by Vulcan and Cemex, in particular given Hanson’s asbestos liabilities. Pro forma, the enlarged HeidelbergCement group will have a turnover of EUR15,826.0m and an EBITDA of EUR2,579.9m. In terms of other aggregates based groups, it will rank second behind Lafarge ( EUR16,909m) in terms of turnover abut ahead of Holcim ( EUR15,170m), though in terms of profitability rank behind both with Holcim being the most profitable.
With a combined historic aggregates output of 345.2Mt, this places the enlarged HeidelbergCement some 32% ahead of CRH, which produced 262Mt last year. Of the 345.2Mt, Hanson contributes 69.9% and HeidelbergCement 30.1%. In ready-mixed concrete, the combined output amounted to 49.5Mm³, of which the existing HeidelbergCement operations contributed 62.8% and Hanson 37.2%. Hanson has only a modest direct involvement in cement, all in California, and 98.0% of the combined cement volumes come from the existing HeidelbergCement operations. HeidelbergCement will finance the purchase of Hanson primarily by debt, but also intends to strengthen the equity base by approximately EUR500m through a rights issue.
The deal will considerably strengthen HeidelbergCement’s US operations and allow downstream integration in Great Britain, where it already owns the second largest cement producer and is now adding the second largest aggregates and ready-mixed concrete businesses. The purchase of Hanson takes the group into Australia, Spain and Israel, but whether it will retain the brick operations remains to be seen. There must also be a question mark over the 25% stake in Cement Australia, as the current HeidelbergCement management does not have a policy of investing in cement businesses that it does not control, as can be seen with the sale of the Vicat stake. The Asia Pacific operations of Hanson in Malaysia and Hong Kong provide a useful vehicle to grow in an area where HeidelbergCement wishes to strengthen its presence.