Rinker looks good with TXI in the frame

Rinker looks good with TXI in the frame
Published: 01 August 2005

Rinker Group’s already bullish outlook in the United States was given a major boost on the weekend after the US Senate passed a US$286.5 billion six-year highway construction bill.  Representing a 31 per cent increase in spending on the previous Transportation Equity Act, the passage of the bill also ends two years of bickering over the costing of the package.  President Bush said the "legislation will help provide the funding needed to carry out overdue work on critical highway and transportation projects".  The new funding will also help Rinker’s share price, which rose 40c to A$15.09 on Friday in anticipation of the bill being passed. 
Rinker has also failed to respond to speculation it could make a A$2bn bid for the Dallas construction materials group Texas Industries (TXI). Any possible takeover move is expected to come under closer scrutiny this week, after TXI spun off its steel-producing arm on Friday. Rinker chief executive David Clarke has on several occasions said he wanted to expand his company’s largely Florida, Arizona and Nevada- based operations into Texas and California. 
TXI is the largest cement producer in Texas and is a key player in California.  However, The only factor weighing against Rinker making a bid is TXI’s surging share price, which hit a record high last week thanks to the takeover rumours. TXI shares have risen 75 per cent since mid-May. The company has a market value of US$1.67bn. Rinker is under growing pressure to give shareholders some form of capital return if it doesn’t make a large acquisition soon.  Rinker is expected to be nearly debt-free by March 31. 
Rinker shares have already tripled in value since the construction material’s group demerger from CSR in 2003.  The upbeat signs for the US construction material stocks is reflected in the 41 per cent lift in the 31-member Bloomberg US Building Materials Index over the past 12 months. Rinker’s shares have gained 83 per cent in the same period.