Rinker Rejects Cemex bid, Mexican firm may walk

Rinker Rejects Cemex bid, Mexican firm may walk
Published: 29 November 2006

Rinker Group Ltd  Wednesday said the US$11.7 billion hostile bid from Cemex SA is "far too low", pressuring the world’s third largest cement maker to sharply improve its terms or walk away from Australia’s largest takeover offer. 
The Australian building materials company said Mexico-based Cemex could afford to pay 38% more and still be ahead while leaving the door open for talks next week when Hector Medina, the second most senior Cemex executive, arrives in Sydney. 
Buying Rinker will boost Cemex’s operations in southern U.S. states, gain businesses in Australia and China and make it the world’s largest supplier of aggregate for concrete construction. But the Cemex offer, pitched at US$13 a share for an equivalent of A$16.60, has been rejected by key Rinker shareholders as a lowball pitch that will fail unless it is significantly increased. 
Cemex, which ranks behind France’s Lafarge and Switzerland’s Holcim, is seeking to take advantage of a decline in Rinker’s share price after a slump in the U.S. housing market, chairman John Morschel told a Sydney briefing. 
"Rinker shares are worth a lot more than what Cemex is offering," Morschel said, who criticized the offer for being set in U.S. dollars and exposing local investors to exchange rate risk. "This bid is opportunistic and far too low," he said. 
The target’s statement issued Wednesday morning includes an independent expert’s report that concludes the Cemex offer is "neither fair nor reasonable", valuing its shares at between A$20.58 and A$23.04. Rinker said Cemex could pay A$23 a share and still show a gain in earnings per share. 
Rinker shares rose 2.5% to end at A$18.51 Wednesday as investors bet Cemex will either raise its offer or another bidder, including a private equity consortium, might put up its hand. 
Morschel said Rinker is exploring all its options following the Cemex offer that was unveiled Oct. 27. 
"We have had discussions with a whole range of organizations in relation to Rinker, but discussions are at a very early stage and we are not, at this point, ready to disclose any details of those discussions," he told CNBC Asia television. 
While Morschel said talks have been held "with a lot of players in the industry", he refused at the Sydney briefing to say if Rinker has spoken to rivals or private equity consortiums. Swiss investment bank UBS is advising Rinker while Cemex has hired Citigroup.