Cemex seals RMC Group acquisition

Cemex, the world’s third-largest cement manufacturer, yesterday completed its Dollars 4.1bn acquisition of RMC Group of the UK after gaining approvals in the US, the European Union and Mexico.  Lorenzo Zambrano, Cemex’s chief executive, offered a bullish prediction on synergies, saying he expected to achieve approximately US$200m in annual savings by 2007. This would be done by "standardising some management processes, capitalising on trading network benefits, consolidating logistics and improving global procurement and energy efficiency".  

Cemex was already the world’s third-largest cement maker, behind France’s Lafarge and Holcim of Switzerland, and now becomes the leading supplier of ready-mix concrete and fourth-largest aggregates company.  Cemex said that with RMC, it will produce about 97Mt of cement a year, and has capacity for 77Mm3 a year of concrete. 

The buyout will double Cemex’s $5.6 billion debt, but the company reiterated Tuesday that it aims to lower net debt to trailing 12-month earnings before interest, taxes, depreciation and amortization, or EBITDA, to 2.7 times by the end of this year. 

The market was cautious about the deal, the largest foreign acquisition by a Mexican company, when it was announced last September. However, the share price has since rebounded dramatically: from 64 pesos on the day the deal was announced, to reach 90.57 pesos last week, although it has since slipped slightly.   The company said the acquisition would be immediately accretive to free cashflow and cash earnings per share. Its target is a 10 per cent return on capital employed in 2007.