Displaying items by tag: Acquisition

Saint-Gobain looks set to increase its presence in the construction chemicals market this week when it announced a deal to buy Fosroc. A definitive agreement has been set for the acquisition valued at just over US$1bn. The purchase will be financed in cash and is expected to close in the first half of 2025.

The light construction materials company has been growing its construction chemicals capabilities for several years now. In 2021 it acquired Chryso for Euro1.02bn and then it bought GCP Applied Technologies for Euro2.3bn in 2022. Acquisitions of smaller companies in the sector, including Duraziv and IMPAC, also took place. With regards to the proposed Fosroc transaction, Saint-Gobain highlighted in its press release that the deal was “supported by solid macroeconomic factors including the transition towards low-carbon concrete.” It also noted that Fosroc’s geographic profile would strengthen its own presence in emerging markets such as India and the Middle East. Chryso’s market share is mainly in Europe, Turkey and Africa. GCP’s is in North America, Latin America and Asia-Pacific.

As Riccardo Stoppa, Saint-Gobain’s Business Director of Cement additives related to Global Cement Magazine in our May 2024 issue, the Construction Chemicals Business Unit of Saint-Gobain’s High Performance Solutions (SGHS) division broadly produces two groups of products for the cement and concrete sector: additives and admixtures; and a wider range of more recent products using newer chemistry approaches. Saint-Gobain’s total annual revenue is around €48bn/yr with SGCC’s contribution weighing in at around €1bn/yr. Most of that latter revenue derives from the former businesses of Chryso and GCP. Finally, Stoppa highlighted SGCC’s strength in North America, Europe and China but also highlighted the potential in the Middle East for its products. That last point makes interesting reading in light of the current Fosroc deal.

India was flagged as a benefit of the proposed Fosroc purchase. If any further reminder of the growth and market consolidation taking place there were needed, UltraTech Cement revealed this week that it is in the process of buying a 23% share of The India Cements. This story ties into the rivalry between the country’s two largest cement companies. Both UltraTech Cement and Adani Group are mounting up production capacity at pace through both acquisitions and by building new plants. All of this is rosy news for a company selling additives and admixtures to the cement and concrete market.

Saint-Gobain latest acquisition is subject to the usual regulatory conditions as one might expect. Yet, what Saint-Gobain didn’t mention in its statement, was that it reportedly had one of its sites in Türkiye visited in late 2023 as part of an international investigation into anti-competitive behaviour in the sector. Switzerland-based Sika was also linked to the case at the time. The UK-based Competition and Markets Authority (CMA) announced in October 2023 that it had launched an investigation into suspected anti-competitive conduct in relation to the supply of chemicals for use in the construction industry. It said it was working with the European Commission and that it had been in contact with other authorities, including the US Department of Justice, Antitrust Division. At this time Sika confirmed to Construction News that inspections had taken place into “suspected antitrust irregularities in the area of additives for concrete and cement.” However, it is important to note here that these were merely information gathering activities and no accusations of any breaches of competition law have been made so far. All of this suggests that Saint-Gobain does not seem too troubled by the interest of the various competition bodies with regards to its expansion plans.

In his interview, Stoppa told Global Cement Magazine that SGCC’s products allow cement and concrete producers to reduce the amount of cement used in their concrete. This is almost heretical thinking to a world that produces too much clinker. Yet Saint-Gobain is betting on exactly this outcome through the expansion of its construction chemicals division. Its purchase of Fosroc is the latest stage in this line of thought. It’s not the only company doing this. In May 2023 Sika completed its purchase of MBCC Group, another admixture manufacturer. Further sector consolidation looks likely.

Ireland: CRH has completed the acquisition of a majority stake in Adbri, having bought the remaining 57% of ordinary shares not owned by Barro under the deal.

India: UltraTech Cement says that it will acquire a 23% stake in The India Cements. The Press Trust of India has reported the value of the deal as US$226m. The transaction is scheduled for completion by the end of July 2024.

Switzerland: Holcim has acquired recycling, ready-mix concrete and aggregates company Cand-Landi Group. The company employs 250 people across its operations in Western Switzerland. Holcim plans for Cand-Landi Group to supply alternative raw materials and fuels for use at its Eclépens plant. It says that the acquisition will increase its recycling capacity of construction and demolition materials by 100,000t/yr.

Holcim CEO Miljan Gutovic said "The acquisition of the Cand-Landi Group will advance decarbonisation and circularity in Switzerland, a lighthouse market for innovation at Holcim. I look forward to welcoming all 250 employees of the Cand-Landi Group and investing in our next chapter of growth together."

UAE: India-based UltraTech Cement has revised its former offer to acquire a 32% stake in RAK White Cement.The group told investors on 25 June 2024 that it is now seeking to acquire a 25% stake. The acceptance period for its previous offer elapsed on 24 June 2024.

Adani Group’s subsidiary Ambuja Cements signed a deal this week to buy Penna Cement for US$1.25bn. The agreement adds 14Mt/yr of cement production capacity to the group with a focus in the south of India. The acquisition is a big step towards the group’s target of reaching a capacity of 140Mt/yr by 2028. Ajay Kapur, the head of Ambuja Cements, also singled out the advantage the company hopes to gain from taking control of Penna Cement’s terminals saying that they would “prove to be a gamechanger by giving access to the eastern and southern parts of peninsular India.” The move is expected to increase the group’s market share in India by 2%, and by 8% in South India.

Penna Cement operates four integrated plants in Andhra Pradesh and Telangana with a capacity of 7Mt/yr. Two of these units also include waste heat recovery installations and one has a captive power plant. It runs two grinding plants in Andhra Pradesh and Maharashtra with a capacity of 3Mt/yr. Another integrated plant is being built at Jodhpur in Rajasthan and a grinding plant at Krishnapatnam in Andhra Pradesh. Finally, the company owns four bulk cement terminals at Kolkata, Gopalpur, Karaikal and Kochi in India, one at Colombo in Sri Lanka and it also owns a 25,000t cement carrier.

Adani Group’s march towards that target of 140Mt/yr by 2028 started off in mid-2022 when it purchased Ambuja Cements and ACC from Holcim. This gave it a starting capacity of 68Mt/yr in the cement sector. Various smaller additions followed including new plants at Ametha and Dahej and the acquisitions of Asian Cement and Concrete, MyHome Industries and Sanghi Industries. The latter company was the biggest of these purchases. Once the in-progress projects from Penna Cement are built, Adani Group should have a capacity of 93Mt/yr. Another 20Mt/yr is reportedly at various stages of execution. The remaining 27Mt/yr is described as being ‘blueprint ready.’

Generally, the local financial press has been in favour of the transaction agreeing with the geographic advantages of Adani Group increasing its presence in the southern states. The benefits of the high number of railway sidings at Penna Cement’s plants were also commented upon as a means for Ambuja Cements to reduce its costs per tonne of cement. The logistics benefit from the port terminals is also expected by Adani Group’s chief financial officer to reduce the group’s logistics costs with an impact expected within the next year. However, it has been reported that Penna Cement’s operating performance had been weaker in the last financial year due to low sales volumes, poor operational efficiency and high coal costs. A takeover by Adani Group could certainly fix the latter two issues. Yet, it has also been reported that competition in the cement markets in Andhra Pradesh and Telangana is up, due to a mismatch between supply and demand. So, improving Penna Cement’s capacity utilisation in these regions might be harder to solve than simply being absorbed into Adani Group.

India’s two largest cement producers both have plans in motion to mount up production capacity by the end of the decade in what has been dubbed ‘the battle of the billionaires.’ The market leader is UltraTech Cement and it has shown reluctance to cede ground to the cement newcomer Adani Group. The former company’s current target is to make it to just under 190Mt/yr by 2027. It said it had a capacity of 152Mt/yr in May 2024. It is ahead of Adani Group by this measure but there is still plenty of scope for surprises. Given the rivalry between the companies there is a regular stream of speculation about which of the smaller cement producers they might be about to buy at any given time. For example, in October 2023 HeidelbergCement India was rumoured to be courting offers from UltraTech Cement, Adani Group and JSW Cement. Last week, Adani Group was reportedly interested in buying either Saurashtra Cement, the cement business of Jaiprakash Associates, Vadraj Cement or… Penna Cement. Occasionally the rumours are true after all. UltraTech Cement remains in first place for now but the situation may change.

Saudi Arabia: Qassim Cement Company (QCC) has successfully completed the acquisition of Hail Cement Company (HCC) for US$378m. The transaction, initially announced on 25 September 2022, involved increasing QCC's capital to facilitate the acquisition of all HCC shares. The acquisition follows a binding implementation agreement reported by HCC on the Saudi Exchange.

India: Following the news of Adani’s multiple acquisition of cement companies, more details have come to light regarding the acquisition of Penna Cement. Adani-owned Ambuja Cement has signed an agreement to acquire Penna Cement Industries (PCIL) for US$1.2bn, aiming to reach a production capacity of 140Mt/yr by 2028. This acquisition adds 14Mt/yr to Adani Cement's total capacity, bringing it to 89Mt/yr, and expands Ambuja's market presence in southern India. The purchase will be fully funded through internal accruals.

Ambuja Cement CEO Ajay Kapur said "PCIL’s strategic location and sufficient limestone reserves provide an opportunity to increase cement capacity through debottlenecking and additional investment. Importantly, the bulk cement terminals will prove to be a game changer by giving access to the eastern and southern parts of peninsular India, apart from an entry to Sri Lanka, through the sea route."

Australia: CRH has won approval from Adbri shareholders to acquire 57% of the company for close to US$1.4bn. The deal was the result of a unanimous vote in favour on 12 June 2024.

Adbri’s lead independent director and chair of its independent board committee Samantha Hogg said “A combined CRH and Adbri will bring growth opportunities, new talent and innovation to continue to strengthen Adbri’s product offering in Australia.”

India: Adani Group is exploring potential acquisitions of several cement companies including Penna Cement, Saurashtra Cement, the cement business of Jaiprakash Associates and Vadraj Cement owned by ABG Shipyard. The group plans to invest US$3bn in these acquisitions to potentially surpass its rival, UltraTech Cement, within three to four years.

The group is ready to offer an enterprise value of US$85-120/t for these businesses, focusing on those with expansion potential, limestone mines and packing terminals. These acquisitions are part of a strategic push to leverage the ongoing government-driven infrastructure boom, which is expected to increase demand significantly.