Adelaide Brighton Limited has entered into an agreement to acquire 30 per cent of white cement producer Aalborg Portland Malaysia Sdn Bhd (APM).
The acquisition price for the 30 per cent equity stake in APM is US$29.7m including US$2.3m for 30 per cent of the net cash on hand, plus transaction costs of about US$0.4m. Completion is expected on 5 December 2012.
APM's facility is situated in Ipoh, on the west coast of the Malaysian Peninsula, approximately 180km north of Kuala Lumpur. It is an integrated white clinker and white cement operation comprising a 180,000tpa capacity kiln, a 200,000tpa grinding mill and a packaging plant.
APM will consider an expansion to increase white clinker capacity by 150,000tpa from 2015 at a cost of US$18.6m. This will be funded through APM’s existing cash balances, internal cash flow and a small increase in debt within the entity.
An agreement with APM for the supply of white clinker to Adelaide Brighton for a term of 10 years from 2015 provides further options for Adelaide Brighton around the efficient leveraging of the company’s Australian production footprint.
The acquisition of the stake in APM will be funded from Adelaide Brighton’s existing facilities. It is expected that on a standalone basis, returns will exceed the Company’s cost of capital following completion of the capacity expansion in late 2014. In addition, the acquisition provides a strategic position in Asia and adds to the range of potential supply sources in a tightening regional cement market.
The remaining 70 per cent of APM is held by Aalborg Portland A/S, a wholly owned subsidiary of Cementir Holding SpA of Italy.