Irish building materials giant, CRH, is in the running for assets that its competitors Lafarge and Holcim will have to sell ahead of their proposed merger.
France’s Lafarge and Switzerland’s Holcim agreed a merger last year that will create the world’s biggest cement manufacturer, with $44 billion in sales, but they must dispose of some assets before regulators will allow the deal to go ahead.
CRH confirmed in a statement that it is in talks with with pair regarding “the potential acquisition of certain assets” that they are selling before completing their merger.
The move pits the Irish group against private equity fund, Blackstone, which is leading a consortium that also wants to bid for the assets.
CRH signalled that it could tap shareholders to help pay for any deal.
“If an acquisition was to proceed, it is likely that it would be funded through a combination of existing cash balances, debt and an equity placing,” the group said.
One source quoted by news agency Reuters said that CRH was seen as the frontrunner having tabled the highest offer for the assets with a bid of €6 billion, although they said it was still too close to call who might win.
CRH warned in its statement that there could be no certainty that its talks with Lafarge and Holcim would lead to any transaction.
Blackstone's consortium, which also includes Cinven and Canadian pension fund CPP, has bid €5.5 billion, a second source said.
A third source said other competing bidders, including a consortium comprising private equity firm CVC, and sovereign wealth funds the Abu Dhabi Investment Authority (ADIA) and Singapore's GIC, were still doing final due diligence on the assets and could still make tweaks to their offers.
“The sellers have not yet picked one bidder for exclusive talks,” one of the people said, adding that such a step may be taken within the next couple of days.
The sources spoke on condition of anonymity because the process is private.
Bankers said the Blackstone consortium is lining up a debt financing of up to 4.5 billion euros, equating to around 5.5 times EBITDA of approximately 725-730 million euros, including undrawn debt.
They said cash-rich institutional investors, who have a preference for event-driven financing, have a strong appetite for the deal.
Lafarge and Holcom initially received more than 60 tentative bids from industry interests and private equity firms for the assets, which they must sell before completing the merger.
But a large number of bidders, such as buyout group KKR , Italy's Italcementi or Turkey's Sabanci , only showed interest in some of the assets, the sources said.
They added that Holcim and Lafarge preferred to offload the complete bundle in one go to avoid the risk of being left with unattractive parts.
Lafarge, Holcim, CRH, Cinven, CPP and CVC declined to comment. ADIA and GIC were not immediately available for comment.
(Additional reporting: Reuters)
