Blue Circle in pounds 401m Greek buy

BLUE CIRCLE Industries, the UK's largest cement producer, yesterday turned its focus temporarily away from emerging markets to acquire majority stakes in Greece's largest construction materials firms, Heracles General Cement and Halkis for pounds 401m.

The international construction materials group, which has spent over pounds 700m in the past two years on acquisitions in the Far East, agreed to pay pounds 401m for Calcemento International, a subsidiary of the Italian diversified industrial and financial group Compart, which controls over 50 per cent of Heracles and more than 70 per cent of Halkis.

The two cement producers, which made a combined profit of pounds 61m on net sales of pounds 321m in 1998, together account for more than nine million tonnes of capacity in Greece.

Rick Haythornthwaite, Blue Circle's chief executive of heavy building materials in Asia and Europe, said: "The deal is good news for Heracles and makes great sense for BCI."

He added that Blue Circle had been interested in Heracles at the time of privatisation and had been in talks with Heracles over the past two years.

The Greek cement market, which grew by more than 5 per cent last year, is set to benefit from orders for the Olympic Games in Athens in 2004, while construction companies have been soaring on the Athenian stock exchange, boosted by hopes of orders from a post-war Yugoslavia.

The acquisition, which includes seven distribution terminals around Greece and Heracles' shipping fleet, will also enable Blue Circle to expand into the eastern Mediterranean and Egypt, which is privatising its cement industry.

Europe's building industry has been in a slump for more than three years, with larger producers looking to expand in Asia and the Americas to compensate for falling demand. However, in March Blue Circle reported a 7 per cent slump in profits last year as Asia's economic turmoil prompted a 72 per cent fall in profits there.

Earlier this year the Greek press reported that Holderbank, along with Lafarge of France, the world's second-largest cement maker, and Italcementi, Italy's largest cement company, were planning to team up to make an offer for Heracles, which Compart planned to put up for sale as it tries to reduce its debts.

The price will be adjusted to take account of a European Commission ruling in March, requiring Heracles to repay pounds 5m plus interest of pounds 56m in state aid which it received in 1986.