HeidelbergCement to buy rival Italcementi for €3.7 billion

Germany's HeidelbergCement plans to buy rival Italcementi for €3.7 billion as the world's second-biggest cement maker puts its repaired balance sheet to work to follow industry leader LafargeHolcim down the path of consolidation.

HeidelbergCement will initially buy Italmobiliare’s 45 per cent stake, paying €10.6 for each share, or €1.67 billion total in stock and cash, and then offer the same for each share held by outstanding investors once the first transaction is approved, it said in a statement Tuesday.

The price offered for each share is 61 per cent higher than Italcementi’s closing price before the deal was announced.

The deal represents HeidelbergCement’s biggest since the £7.9 billion acquisition of Britain’s Hanson in 2009.

Chief executive officer Bernd Scheifele has managed to give the company more breathing space from the debt built up in that ill- timed takeover, allowing him to pursue an expansion just weeks after Holcim and Lafarge completed their industry-transforming merger of the biggest cement companies in Switzerland and France.

Still, London-based Bernstein analyst Phil Roseberg said the Italcementi acquisition could backfire and hurt earnings.

“We struggle to see the strategic rationale for Heidelberg,” he said in a note to clients.

“Acquiring more mature markets that are in long-term contraction, and having to deal with markets with clear issues - Italy, France, Egypt, Thailand - are problems that could have been avoided.”

The acquisition of Italcementi will expand HeidelbergCement’s operations in Mediterranean countries such as Italy and Egypt as well as in France and Belgium, which combined represent the Bergamo, Italy-based company’s biggest market.

“With the market recovery gaining traction in southern Europe and the US, it is now the right time for us to accelerate our growth,” Scheifele said Tuesday.

Italcementi’s stock has gained 33 per cent this year, valuing it at €2.3 billion.

Bloomberg