Displaying items by tag: Mittal Investments

Back in May 2012 we asked who would buy Lafarge's Hope cement plant in Derbyshire. The answer was, of course, a company with an Indian background: Mittal Investments.

The sale was a condition of the UK Competition Commission in response to the proposed joint venture between Lafarge and Tarmac. It also included 172 ready mix concrete plants, five aggregates quarries, two asphalt plants, one marine aggregates wharf, one rail-linked aggregates depot and the sale of Tarmac's 50% ownership interest in Midland Quarry Products. Mittal has paid Euro339m for the assets, including up to Euro37m dependent on the performance of the assets over the next three years.

At the time we predicted that it might be a company from a fast growth area, with excess cash and a desire for technical knowledge, perhaps from China or the Middle East. Far more fitting for the UK, however, was a company with Indian roots, especially considering the cultural links between the two countries dating back to the colonial era.

Originally from India but based in London, owner Lakshmi Mittal runs steel multinational ArcelorMittal and he frequently tops UK rich lists. The Mittal family even own shares in Premier League football team Queens Park Rangers. The sale follows acquisitions of well-known British brands such as car manufacturers Jaguar Land Rover and British Steel/Corus to the Tata Group.

The sale to Mittal leaves the UK cement market with four companies. Mittal's new plant in the UK joins Lafarge's four plants, Cemex's two plants, Hanson Cement's three plants and Tarmac Buxton, Lime & Cement's single plant, which is soon to join with Lafarge's plants in the joint-venture. Geographically the sale to Mittal breaks up a concentration of three Lafarge and Tarmac plants in Derbyshire in the southern Pennines. Presumably this was the aim of the Competition Commission in the first place.

Selling the Hope plant makes sense for Lafarge and Tarmac. The sale leaves Lafarge's generous spread of plants across the UK in key locations except the south of England. The combined cement production capacity of Lafarge and Tarmac will fall from 4.35Mt/yr to 3.85Mt/yr. The reduction may actually help Lafarge, given its 9% fall in cement sales volumes so far in 2012 and the pessimistic outlook for the UK cement sector in 2013. The reduction in capacity manages this decline closely at 11%.

The UK cement industry has likely become more competitive with the range between the production capacities of the four companies reduced. However the price Lafarge and Tarmac have paid the Competition Commission for their joint venture was almost certainly worth it. Lafarge-Tarmac retains Lafarge's dominant position in a streamlined shape now matching the market reality.

Update: This article was corrected on 27 November 2012. The UK temporarily has five cement producers until the Lafarge-Tarmac joint venture gains approval from the UK Competition Commission. Then it will return to four.

UK: Lafarge SA and Anglo American plc have announced they have agreed to sell a portfolio of Tarmac and Lafarge construction materials operations in the UK and Tarmac's 50% ownership interest in Midland Quarry Products Limited (MQP) to Mittal Investments, the private investment vehicle of the Lakshmi N Mittal family.

The consideration paid by Mittal Investments for the assets is Euro338m including up to Euro37m based on the performance of the underlying assets over the next three years. In addition, an estimated amount of Euro16m relating to working capital of the divested assets not transferring with the business will be released as funding to the newly formed joint venture between Lafarge and Tarmac.

The divestments, which are conditional upon regulatory approval, comprise a cement plant in Hope, Derbyshire, with a capacity of 1.4Mt/yr and related depots; a network of 172 ready mix concrete plants; five aggregates quarries, two asphalt plants, one marine aggregates wharf and one rail-linked aggregates depot; the sale of Tarmac's 50% ownership interest in MQP, which is also subject to regulatory approval, and a right of pre-emption in favour of Hanson Quarry Products Europe Limited.

The sale of these assets is the principal condition to receiving final clearance from the Competition Commission for the formation of a 50:50 joint venture, which will combine Tarmac's and Lafarge's cement, aggregates, ready-mixed concrete, asphalt and asphalt surfacing and maintenance services and waste services businesses in the United Kingdom in a joint venture (JV).

Completion of the JV is expected in early 2013 and, once established, the companies say that it will create a new, leading UK construction materials company, with a portfolio of high quality assets, drawing on the complementary geographical distribution of operations, the skills of two experienced management teams and a portfolio of well-recognised, innovative brands.

Lafarge said that a further announcement would be made in due course.