Cemex offloads bonds to cement Rinker bid

Cemex offloads bonds to cement Rinker bid
08 February 2007

Cemex has sold off US$750m ($965m) worth of hybrid bonds to clean up its balance sheet in preparation for its hostile US$12.8bn takeover of building materials group, Rinker.

Cemex, which launched its US
$13 ($16.74) a share offer last October, has been rebuffed by Rinker, which said the bid was unfair and unreasonable.

Rinker’s chief executive David Clarke said the offer was "far too low" - well below the independent expert’s valuation of the company, which was between $20.58 and $23.04 a share.

Cemex is awaiting for approval from the US regulatory authorities - not expected until next month.

Cemex is unlikely to move on its offer price until it gets the green light from the US authorities. The Mexican predator recently extended its offer for Rinker until March 30.

According to analysts the hybrid bonds were sold to give Cemex a stronger balance sheet in order to finance the takeover of Rinker.

Simon Thackray of ABN AMRO said: "While I would not read too much into it, I would say that Cemex’s bid is well and truly alive."

Other analysts said that hybrid bonds were often used by big corporations to raise capital in the bond markets, and at the same time show a reduction of debt on their balance sheets. The bonds have no fixed maturity and carry higher yields than traditional bonds.

Mr Thackray said that while hybrid bonds were priced as debt, they were often treated as equity.

Dario Pedrajo, a senior fund manager with Kapax Investment Advisers in Miami, told Bloomberg that Cemex was looking to improve its balance sheet by selling the hybrid bonds.
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