Rumours that Ciments Francais could be preparing to increase its stake in Suez Cement seem to be gathering pace.
Press reports last week that Ciments Français, the 74.6 per cent owned international subsidiary of Italcementi is likely to launch a bid for Suez Cement in the coming weeks. This would be in response to the 45 Egyptian pounds a share bid made by Egypt's state-owned National Investment Bank on the 5th of August for a nine per cent share in the company. The company¹s free float is noted at around 26 per cent. Ciments Français currently has a 34 per cent stake in Suez Cement, which with a cement capacity of 4Mt holds about 15 per cent of the Egyptian market on a stand alone basis. Suez however is the majority shareholder in Tourah, which has a cement capacity of 8Mt.
As analysts at Deutsche Bank report: Ciments Francais has consistently flagged that it is likely to increase its holdings in Egypt and
India so this news does not come as unexpected. The price mentioned of EGP 45 is only 10 per cent above the average share price of Suez Cement for the last six months. It would imply an EV of circa EGP 4.4bn, circa Euro 655m, which Ciments Français is reported to say as being below the value they place on the group. The Egyptian market is currently facing a difficult environment with over capacity ad weak prices. The long-term prospects for the country however remain strong. It seems that Ciments Francais are assessing their options. A bidding war between Ciments Français and the National Investment Bank however would not be desirable, concludes the Deutsche Bank analysis.