Holcim’s capital hike less dilutive than expected

Holcim’s capital hike less dilutive than expected
Published: 13 April 2004

Holcim will issue fewer new shares than expected in a capital increase to raise 1.5 billion Swiss francs ($1.18 billion), the world’s second biggest cement group said on Thursday, easing concerns over profit dilution.  Recent share price gains meant Holcim could raise the cash by offering fewer shares than had been earmarked. However, the stock edged lower after the group said it would offer one new share for each seven held at a discounted price of 52 francs. 

Holcim has said it would use around half the proceeds of the capital increase to fund the raising of its stake in its profitable Mexican division Apasco, while the rest would go towards paying back loans.  Bank Leu analyst Patrick Appenzeller said that reaping more profits from the already majority-owned Apasco combined with the lower interest costs after paying down debt would offset the dilutive effect of the one-for-seven share offer.  "While the number of shares will increase by 14 per cent, we calculate a 14 per cent higher profit due to the lower Apasco minorities as well as lower financial expenses," he said.

Holcim first announced the capital increase plans in March, since when its shares have risen by around six percent. The stock has climbed by 20 percent so far this year on hopes that construction projects will pick up in line with the economy.  Holcim said the increase was fully underwritten by a syndicate of banks on April 7 and that it would present the details to the annual general meeting on May 14.  Shareholders would be offered new stock from May 18, the firm said in a statement, adding it would make an application to trade rights on the Swiss exchange from May 18 to May 25.

The Swiss firm has said it would spend $590.9 million from the capital increase to take its stake in Apasco to 93.4 percent. The rest would go towards financing the three billion francs in investments made since its last capital increase in June 2001.  Analysts have welcomed the takeover of the debt-free Mexican company given the high profitability of Apasco - Mexico’s second-biggest cement maker after the world’s No. 3 Cemex.