Argentine cement maker seeks buyer

Argentine cement maker seeks buyer
Published: 12 August 2004


Loma Negra, Argentina’s largest cement company, is putting itself up for sale in a deal that could attract global industry powerhouses, people familiar with the matter said.  Bankers say the company is talking about a preliminary sale figure of $1 billion. Closely held Loma Negra, which commands a 48% share of Argentina’s domestic market, could be attractive to global cement groups such as France’s Lafarge SA and Mexico’s Cemex SA -- respectively the world’s No. 1 and No. 3 cement makers -- and companies such as Portugal’s Cimpor and Brazil’s Camargo Correa and Votorantim Cimentos.  Swiss giant Holcim Ltd., the world’s second-largest cement maker, is seen as an unlikely bidder because it already controls 34% of the local market through Minetti SA, Argentina’s second-largest cement group. A Loma Negra takeover would raise the issue of market concentration.

But the sale to a foreign company, if it materializes, could be an isolated event for some time. Foreign direct investment in Argentina plunged from $10.6 billion in 2000 -- a year before the peso collapsed and sent the economy into a tailspin -- to $100 million last year, said Yusuke Horiguchi, chief economist of the Washington-based Institute of International Finance. The country’s economy rebounded to grow 8.7% last year. But the IIF estimates foreign direct investment in Argentina will reach just $150 million in 2004.

J.P. Morgan Chase & Co. is advising Loma Negra, which is controlled by Argentina’s richest woman, Amalia Lacroze de Fortabat. Loma Negra executives couldn’t be reached for comment.  Cemex declined to comment. Representatives for other potential bidders either couldn’t be reached for comment or didn’t return calls seeking comment.

Industry executives say it could be hard for Loma Negra to get its asking price. The $1 billion price tag means the company is looking to be sold for the equivalent of nine times its estimated operating cash flow of $108 million for 2004. By comparison, the share price of Cemex, a publicly held Latin American cement giant, values that company at about seven times its 2004 operating cash flow.

Started in the 1920s by the late Alfredo Fortabat -- Ms. Fortabat’s husband -- Loma Negra grew through acquisitions and now has nine plants with total capacity of seven million tons a year. But with Argentina’s  economic downturn, only 40% of the company’s capacity is being used.

Loma Negra is going on the block as Argentina’s construction industry is trying to get back on its feet. Construction went into a recession in 1999 and activity had fallen some 40% by 2002, said Mariano Ingaramo, an analyst with Standard & Poor’s in Buenos Aires. Last year, activity rose 30%, although from a low base the previous year.  The timing of a sale could also be ripe for Cemex, where management has been trying to persuade investors about the merits of a potential acquisition.