Displaying items by tag: Acquisition

India: UltraTech Cement has concluded an agreement to acquire Kesoram Cement from Kesoram Industries for US$912m. The Times of India newspaper has reported that the price includes an equity value of US$646m and debt of US$267m. As part of the deal, Kesoram Industries shareholders will gain single shares in UltraTech Cement for every 52 shares they hold in Kesoram Industries.

Kesoram Cement operates two cement plants – the 10.8Mt/yr Vasavadatta plant in Karnataka and the 660,000t/yr Kesoram cement plant in Telangana – and a packing plant in Maharashtra.

Kesoram Industries says that the sale of Kesoram Cement will help it to focus on its chemicals, rayon and transparent paper businesses.

India: UltraTech Cement has bought the 540,000t/yr Patratu grinding plant from Burnpur Cement for US$20.4m. The Hindu Business Line newspaper has reported that the purchase brings UltraTech Cement’s installed cement capacity to 133Mt/yr.

Taiwan Cement Corporation (TCC) has struck a deal to take control of the Türkiye and Portugal-based parts of OYAK’s cement business. The arrangement will see TCC grow its share of the joint-venture business in Türkiye to 60% from 40% at present and it will fully take over the Cimpor joint-venture in Portugal by purchasing OYAK’s 60% stake. Overall TCC is expected to pay around Euro740m for its acquisitions. A final agreement on the deal is expected to be signed in early December 2023.

The proposed deal follows on from when TCC originally spent US$1.1bn towards setting up joint-ventures as a junior partner with OYAK back in 2018. The situation now appears to have reversed with TCC becoming the main owner of the cement business in Türkiye and the sole owner of Cimpor in Portugal. In Türkiye this gives TCC control over the largest cement producer with seven integrated plants, three grinding plants, 47 ready-mixed concrete (RMX) plants, three aggregate quarries and one paper packaging plant. In Portugal (and Cape Verde) this puts TCC in charge of three integrated plants, two inactive grinding plants, 42 RMX plants, 15 quarries, two mortar plants and a cement bag unit.

This contrasts with last week’s news that CRH is buying one cement plant in Texas (with associated assets) for US$2.1bn. TCC is taking control of 10 plants in Türkiye and Portugal for Euro740m. It is not a fair comparison given the woes of the Turkish economy in recent years, prior joint-venture business ownership and so on. Yet it is one more example of the changing nature of cement company ownership around the world since the mid-2010s.

The state of the economy in Türkiye may well be a factor for the change in ownership at OYAK and Cimpor as well as negative exchange rate trends. High inflation has caused problems in recent years, although the government changed its stance on avoiding putting up interest rates following the elections in May 2023. Yet, in a statement about the OYAK deal, chair Nelson Chang said that “companies that do not understand carbon will not survive in the future.” His company is about to spend Euro740m and become the fifth largest cement producer in the world on the assertion that it does understand carbon. Good luck!

Accordingly, the language in the press releases both OYAK and TCC have released is all about sustainable growth and reducing carbon emissions. However, the detail on how exactly they intend to do this is vague. What is clearer though is that OYAK is hoping that TCC invests in energy storage and related industries such as lithium-ion battery additive carbon black in Türkiye. To this end a TCC subsidiary and OYAK are collaborating on a carbon black plant in Iskenderun and further investments may be in the pipeline. TCC and OYAK are also responsible for a couple of calcined clay projects in Sub-Saharan Africa.

Readers may recall that the chair of Chang pronounced in June 2023 that TCC was aiming to diversify the business towards over 50% sales from non-cement sectors by 2025. However, the share from the cement business was around 68% in 2022 and this latest deal with OYAK will likely send it in the ‘wrong’ direction. The company already has a production capacity of around 77Mt/yr from its cement plants in China and Taiwan. Majority ownership of OYAK Çimento and Cimpor Portugal will bump this up to 99Mt/yr and put the company into the top five of the world’s largest cement producers by capacity.

The final question here is what kind of owner TCC intends to be to its growing cement businesses in West Asia and Europe. Publicly at least, it has come across as a backseat investor since 2018 although it has been a minority owner. This has now changed but it will be interesting to observe whether the subsidiaries in the west will be run at arm’s length or more closely and if TCC unifies its global branding and so on. Watch this space.

Türkiye: Taiwan-based Taiwan Cement Corporation (TCC) has signed a preliminary memorandum of understanding (MoU) with OYAK Çimento. Under the MOU, the parties will enter into negotiations over the transfer of a further 20% stake in OYAK Denizli Çimento to TCC. This will raise TCC’s stake in the company to 60%. Reuters has reported the total enterprise value of OYAK Denizli Çimento as US$1.42bn.

India: UltraTech Cement, India’s largest cement producer has commenced negotiations to acquire promoters’ stakes in Kesoram Industries, which sells cement under the Birla Shakti brand. It has two cement plants: Vasavadatta Cement in Sedam, Karnataka, and Kesoram Cement, located in Basantnagar, Telangana. The two plants have a combined cement capacity of 10.8Mt/yr.

Germany: Loesche says it has acquired the technical knowledge of hydraulic systems supplier Ruhfus Systemhydraulik following the latter company’s insolvency. The acquisition of Ruhfus’ expertise will expand Loesche's capabilities in the field of hydraulic technology and enable the company to offer spare parts and services outside of the cement sector. In addition, a collaboration with former employees of Ruhfus Systemhydraulik will help it to develop new hydraulic solutions.

Ruhfus Systemhydraulik was originally founded as Rheinisches Kleineisenwerk August Ruhfus in 1907. It originally supplied metal parts for the railway sector before moving into hydraulics in the late 1950s. The company is based in Neuss and has over 100 employees.

The Hunter cement plant in Texas looks set to become one of the most expensive integrated units in the world following the announcement this week that CRH is preparing to buy it for US$2.1bn. The Ireland-headquartered company said that it has agreed to acquire the plant at New Braunfels near San Antonio from Martin Marietta Material. The deal also includes four cement terminals around and near to Houston and 20 ready-mixed concrete (RMX) plants near to San Antonio and Austin. It is expected to complete in the first half of 2024 subject to regulatory approval.

Assessing the value of this deal is tricky given the various RMX plants and terminals in strategic locations. However, solely based on integrated cement production capacity, this one works out at US$1000/t given that the Hunter plant has a production capacity of 2.1Mt/yr. The value of terminals and RMX plants in the right locations cannot be overstated, but it still appears to price the cement plant dearly. CRH bought Ash Grove in 2018 for US$350/t. Five years later and the price it is paying for cement production capacity in the US has nearly tripled.

Other more recent purchases in the US include US$395/t for UNACEM’s acquisition of the Redding cement plant in California earlier in November 2023, around US$525/t for the valuation of Argos North America’s four integrated plants in September 2023, or just over US$310/t for the proposed purchase of the Redding cement plant by CalPortland from Martin Marietta Materials in March 2022. The Argos North America valuation is another awkward one given that it is part of the proposed merger between it and Summit Materials and it also includes two grinding plants, 140 ready-mix concrete plants, and a distribution network of eight maritime ports and 10 inland terminals.

Figure 1: Map of CRH production assets in Texas. Source: CRH earnings presentation.

In a statement, CRH’s chief executive officer Albert Manifold highlighted the usual synergy benefits but he also mentioned the expected “self-supply opportunities.” He added that the company believed that there was “significant potential to unlock additional growth opportunities across an expanded footprint in this attractive growth market.” If the acquisition completes, the company will become the largest cement producer in the state, based on integrated production capacity, at around 3.2Mt/yr. Plus, as the company pointed out in its third quarter earnings update, it also operates the Foreman cement plant in Arkansas, just across the state border to the north-east. This then gives CRH and its subsidiary Ash Grove a cement plant and/or terminals in the main population areas in Texas, namely: Houston; San Antonio and Austin; and Dallas and Fort Worth.

One reason why CRH may have gone all out for a cement plant in Texas is because it is one of the few states in the US where cement shipments have actually increased so far in 2023. Data from the United States Geological Survey (USGS) shows that shipments of Portland and blended cement fell by 2% year-on-year to just under 71Mt in January to August 2023. Yet Texas comprehensively bucked this trend with shipments rising by 10% to 8.04Mt. The only other states with this kind of growth were Maine and New York. At the start of 2023 the Portland Cement Association (PCA) predicted a 3.5% decline in cement consumption in 2023 and based on the January to August 2023 data from the USGS it isn’t far off at present.

Meanwhile, selling its cement assets in Houston and San Antonio nearly brings Martin Marietta Materials’ decade-long excursion into the sector to an end. It purchased its cement plants in Texas in 2014 when it acquired Texas Industries (TXI). Plants in California were soon sold to CalPortland but Martin Marietta Materials later picked up two more cement plants in the state when it bought the US West Region of Lehigh Hanson from Heidelberg Materials in 2021. Then, once again, the plants were sold, this time to CalPortland and UNACEM, respectively. This now leaves Martin Marietta Materials with one integrated cement plant, Midlothian, and two terminals. The size of the Midlothian plant, at 2.4Mt/yr, still gives the company a decent presence in the state.

With US cement consumption expected to bounce back to growth in 2024 and the Texas market ahead of this, CRH’s decision to buy big from Martin Marietta Materials seems like a logical move given its focus on North America. The price may seem high, but the investment seems as close to a steady bet as it gets. The day after the Texas announcement CRH revealed that it was selling its lime business in Europe to SigmaRoc for US$1.1bn. The key bit though was that these assets generated earnings of around US$137m in 2022 but, by comparison, the new units in Texas are expected to earn US$170m in 2023. This suddenly makes the price agreed for Hunter seem more reasonable. Let’s check back in a couple of years to see how well CRH’s acquisition in Texas works out. In the meantime all eyes are likely to be on what Martin Marietta Materials does next with the Midlothian plant.

Malaysia: UEM Group, a subsidiary of the Malaysian sovereign wealth fund, has revealed that it has shortlisted prospective buyers for Cement Industries of Malaysia (CIMA). The Edge Malaysia newspaper has reported that the list is comprised of four local entities, one entity based in China, one in Germany and one in the Philippines. None of the bidders is reportedly an existing competitor of CIMA in the Malaysian cement sector.

CIMA operates the 1.3Mt/yr Bahau cement plant in Negeri Sembilan. UEM group announced that it was seeking a buyer for the business in February 2023, at which time it was seeking a valuation of US$230m for it.

Europe: Ireland-based CRH has agreed to sell its European lime business to UK-based SigmaRoc for US$1.1bn. The business controls 16 sites across the Czech Republic, Germany, Ireland, Poland and the UK. CRH says that the first phase of the transaction, which is scheduled for completion in early 2024, will hand over control of the Czech Republic, Germany and Ireland businesses to SigmaRoc, while control of the Poland and UK business will pass over in two subsequent phases.

CRH chief executive officer Albert Manifold said “The decision to divest at an attractive valuation follows a comprehensive review of the Business and demonstrates CRH’s active approach to portfolio management. The proceeds from the divestment will provide us with significant additional capital allocation opportunities to deliver further growth and value creation for our shareholders.”

US: Ireland-based CRH has concluded a deal for the acquisition of Martin Marietta Materials’ South Texas business. This includes the 2.1Mt/yr Hunter cement plant, a network of cement terminals on the Gulf of Mexico and 20 ready-mix concrete batching plants. The value of the transaction is US$2.1bn.

CRH chief executive officer Albert Manifold said “The acquisition of these high-quality assets further strengthens our market leading position in Texas and increases our exposure to attractive, high-growth markets. Our ability to leverage our cement expertise and technical capabilities will enable us to enhance and optimise our existing footprint in Texas, resulting in significant synergies and self-supply opportunities. This transaction reflects our disciplined approach to capital allocation as well as our commitment to deliver further growth and value creation for our shareholders. We also believe there is significant potential to unlock additional growth opportunities across an expanded footprint in this attractive growth market.”