Holcim cements British and Indian deals

The world's number two cement producer expands to India Keystone

Swiss cement giant Holcim says it has put in an offer for Britain’s Aggregate Industries. It has also announced a new venture in growth market India.

Holcim said on Thursday that it had reached a unanimous agreement with Aggregate Industries, valuing the British company at £1.8 billion (SFr4 billion).

The offer price represents a 22.8 per cent premium over Wednesday’s closing share price for the British company.

Holcim, the world’s number two in cement, will finance the investment with existing cash balances and new committed credit facilities.

It says the deal will give it access to the key British market and create savings worth £100 million by 2007.

Holcim also hopes that it will reap the rewards of replicating the British group’s business model in its own aggregates business.

Strengthen

“The combination with Aggregate Industries strengthens the position of Holcim as an integrated supplier of building materials,” said Holcim chief executive Markus Akermann in a statement.

“Aggregate Industries brings high quality aggregates and downstream businesses giving important value benefits for Holcim in the United States,” he added.

“Entry into the attractive British market is part of our strategy of being present in all key markets.”

Analysts point out that the British acquisition represents a double strategic shift for the Swiss company, although it does not necessarily amount to an outright change of strategy.

Double shift

First, it constitutes a change from Holcim’s historical – and highly successful – focus on emerging markets.

Second, it will mark a significant extension of aggregates – the components such as gravel and stones that make up concrete – operations for a company that has traditionally concentrated on the pure cement market.

But some analysts question the amount offered, pointing out that profit margins in the aggregates business are notably lower than in the pure cement sector.

In a separate development, Holcim also announced on Thursday a strategic alliance with India’s Gujarat Ambu Cements.

The company said it would invest a total of $800 million (SFr948 million) to secure its long-term position in the Indian market – the world’s second largest for cement.

swissinfo with agencies

Key facts

Holcim, formerly Holderbank, is the number two player in the cement and aggregates market after Lafarge of France.
Net profit at Holcim rose by 35.6% in 2003 to SFr686 million on sales of more than SFr12 billion.
Active in more than 70 countries, Holcim employs 48,000 people.