Merrill Lynch on Cemex bid
Cemex has launched a bid at GBP8.50, a 39 per cent premium to previous 30 days, with agreement from RMC management. Before any synergies, this would represent a 13.5x 2005E P/E. Cemex states it expects US$200m of synergies by 2007E, which would be two per cent of 07E sales.
Merrill Lynch analysts sees Cemex’s bid as reasonable if it can achieve aggressive cost cutting targets (and its track record combined with RMC’s troubled one gives cause for hope on this front), although the multiples before synergies are full.
Anti-trust issues should be very minor - overlaps in
Strategically, widening Cemex’s cashflow base away from
No counter bidders are expected: although Holcim could financially and competition-wise, consider an approach, it would be a stretch to match, let alone beat, Cemex. A consortium effort from other ’usual suspects’ (CRH, Lafarge, Anglo-American, HeidelbergCement) would surely be too unwieldy to be likely – state Merrill Lynch. Direct interest in RMC’s German assets from groups in that market with stronger synergy opportunities would clearly be better served by offering for just the German business, not a group bid, and might be something that Cemex could take advantage of, quickly crystallizing the value in a troubled operation.
Does this herald a second round of cement mergers? Cement majors have been constant consolidators globally, only taking breaths between credit-stretching sprees. Most remaining mid-sized groups are now meshed in family ownership, with Cimpor (local contractor Teixeira Duarte leading shareholder, plus Lafarge and Holcim among the rest) perhaps the main exception - concludes Merrill Lynch