Hong Kong-listed China National Building Material announced Wednesday it will pay 961.1 million yuan (US$120m) to fully acquire Xuzhou Conch Cement, in a move designed to boost its production capacity in Jiangsu province.
“The acquisition will enable us to increase cement production capacity, strengthen competitiveness and expand our influence in the Huaihai Economic Zone in Jiangsu province,’’ Song Zhiping, chairman of Beijing-based China National Building Material, said in a statement filed with the Hong Kong stock exchange.
The acquisition came after CNBM’s rival, Anhui Conch Cement, China’s largest cement maker, purchased a 20 per cent stake in Anhui Chaodong Cement Group for about 93.74 million yuan earlier this month.
Industry analysts said although the operating environment in the mainland’s cement industry is challenging – in light of the central government’s latest macroeconomic measures aimed at cooling the rapid growth in the country’s property sector – merger and acquisition opportunities still exist, as Beijing is trying to encourage cement makers to consolidate in order to alleviate the problem of overcapacity and overinvestment.
“The cement market will become better this year compared with a year ago,’’ said Geoffrey Cheng, director of equity research at the Daiwa Institute of Research. Cheng added that as some major cement makers increase their export volumes this year, the mainland’s current glut can be alleviated.
The number of cement makers in China is expected to be reduced to 3500 from last year’s 5100, according to Beijing’s 11th Five-Year Plan ending in 2011.