Cemex Seeks Stable Cash Flow From Major UK Acquisition

Global Finance, Nov 2004

EUROPE

Cemex, the Mexican cement maker that has conquered global markets, agreed to buy British building materials firm RMC for $5.3 billion including debt.

The acquisition was the largest ever by a Mexican company and will double revenues at Cemex, the world's number three cement maker.

Lorenzo Zambrano, chairman and CEO of Cemex, says RMC will give the Mexican company access to developed markets with more-stable cash flows.

RMC, the world's biggest maker of ready-mixed concrete, is one of Europe's leading cement producers. It also is the market leader in aggregates such as sand and gravel.

Cemex agreed to pay a premium of about 43% to RMC's stock price and is counting on the deal to generate about $200 million in annual synergies by 2007.

The acquisition will help it to compete with market leaders Lafarge of France and Holcini of Switzerland in the cement and concrete sector.

Cemex is funding the acquisition with debt, to be underwritten by Citigroup and Goldman Sachs, advisers to the Mexican firm on the RMC takeover. The financial package also will allow Cemex to refinance all of RMC's debt.

The transaction was the first major purchase by Cemex in three years, but its sixteenth since 1992. It will give Cemex a much larger presence in Europe, along with opportunities for growth in Eastern Europe.

Cemex already has operations in 30 countries on four continents. Britain and Germany account for about 45% of RMC's sales.

Zambrano says the RMC transaction will be immediately accretive to free cash flow and will broaden the company's global reach and product mix.

RMC is in the midst of a restructuring that has reduced its workforce to about 28,000 from 33,000 two years ago.