Mexicans cement £2.3bn RMC bid

Cemex buys 18 per cent stake in dawn swoop on UK aggregates giant as analysts rule out counter-offer
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The Independent Online

RMC, the troubled UK building materials group, was swallowed up for £2.3bn yesterday by the world's third-biggest cement producer, Cemex of Mexico.

Cemex is paying 855p-a-share for RMC - a 43 per cent premium to its closing price last week - and taking on some £900m of debt, putting a total value on the deal of £3.2bn.

Analysts said a counter-bid was highly unlikely given the full price the Mexicans are paying and the regulatory hurdles that rival suitors would probably face. To strengthen its position further Cemex swooped in a dawn raid yesterday, snapping up 18 per cent of RMC's shares in the market.

The takeover will create a combined business with sales of $15bn (£8.3bn), catapulting Cemex ahead of rivals such as Holcim of Switzerland and CRH and turning it into the world's second biggest building materials supplier behind Lafarge of France, which bought the UK cement producer Blue Circle three years ago.

Cemex has grown rapidly through acquisition in the past decade, culminating in the $2.8bn takeover of the US cement maker Southdown in 2000. It is chaired by Lorenzo Zambrano, one of Mexico's wealthiest and best-known businessmen. He is ranked 58th in the Forbes rich list and his family owns 30 per cent of Cemex. Mr Zambrano is also on the board of IBM and the chairman's committee at DaimlerChrysler as well as being a board member of a string of other banking, media and industrial companies in his native Mexico.

Cemex began its move on RMC a fortnight ago when Mr Zambrano flew into London with an offer which was rejected by Sir John Parker, the chairman of RMC. Terms were agreed last week when Sir John flew to New York for a second meeting with his opposite number.

RMC's chief executive David Munro, who was parachuted into the business only nine months ago to help restore its fortunes, is not expected to stay with the company. He is on a one-year contract and will receive a pay-off worth about £1.3m, made up of £575,000 in base salary and stock options which are showing a profit of £670,000 at the offer price.

Sir John said that although RMC was only part way through a recovery programme, instituted after the removal of its previous chief executive, the board had concluded that the Cemex offer would create "superior cash value" for shareholders.

RMC has been hit badly by problems in its German operations and at its Rugby cement plant in the UK. It has also been fined heavily by Brussels for operating a cartel along with other European building materials suppliers.

Cemex shares fell heavily in Mexico and New York on concerns that the company was overpaying. But Mr Zambrano insisted this was not so, telling analysts: "This is the right acquisition at the right time and at the right price."

He argued that the rapid expansion of Eastern Europe, driven by the EU accession states, presented huge opportunities for growth. Other than Spain, Cemex has no presence at all in Europe.

Competition issues are not expected to present a major hurdle since RMC overlaps with Cemex in only two of the 22 countries in which it operates - Spain and the US. Sir John said Cemex had plans in place to deal with any issues which might arise in these two markets.

Cemex said it expected to make $200m of savings by integrating the companies but would not be drawn on whether this would mean job losses among RMC's 28,000-strong workforce.

The UK and US are RMC's two biggest single markets, each accounting for about one-fifth of its £4.7bn of annual sales. Including Germany and other Continental markets, about 70 per cent of RMC's turnover comes from Europe.