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Cemex offers to buy Rinker for $12.8 billion
2006-10-27
Mexico's Cemex, the world's No. 3 cement giant, bid $12.8 billion for Australia's Rinker Group Ltd. on Friday to create one of the largest global building-materials firms with a larger U.S. presence. Cemex, which operates in 50 countries, said the $13 per share offer for Rinker(RIN.AX) is a 27 percent premium to Rinker's Friday closing price on Australia's stock exchange. The deal would give Cemex (CEMEXCPO.MX)(NYSE:CX), already the top U.S. cement player, even bigger operations there as 80 percent of Rinker's earnings come from the United States. If shareholders accept the unsolicited offer, it will be the biggest-ever takeover by a Mexican company, more than twice the size of Cemex's 2005 acquisition of Britain's RMC for $5.8 billion. Rinker's shares jumped 5.8 percent in late trade to close at A$14.70 on Friday. Cemex's Mexican shares dropped 2.44 percent to 33.60 pesos. Its New York-traded stock fell 1.72 percent to $31.44. Rinker is focused on the fast-growing states of Florida and Arizona and Rinker's business in Australia, where it is the market leader, will open a new market for Cemex. The combined company would have revenue of $23.2 billion, Cemex said. "Rinker represents a good opportunity for Cemex, given it has solid presence in key regions of the United States, which according to Cemex, complement its current operations," said Marco Reyes, analyst with Scotia brokerage in Mexico. A Rinker spokeswoman in Sydney said the company had not been expecting a takeover offer. "It was clearly an unsolicited bid. It's too early to make any comment at this stage about our response," said Rinker spokeswoman Debra Stirling. Shares of Rinker, which makes crushed rock, cement, asphalt, concrete and concrete pipes, have lost nearly one-third of their value since April on concerns about the U.S. housing market. "The acquisition of Rinker meets our strict investment criteria and will further reduce the volatility of Cemex's cash flow and our cost of capital," said Cemex Chairman and Chief Executive Lorenzo Zambrano. Cemex said it expects to see about $130 million in pretax annual cost savings by the third year following the acquisition. It expects the deal to immediately boost free cash flow and cash earnings per share. The deal is subject to customary closing conditions, including the acquisition of more than 90 percent of Rinker shares, Australian and U.S. regulatory approval and approval by Cemex shareholders. Cemex said it has obtained financing commitments to fund the deal. Citigroup (NYSE:C) is Cemex's lead financial advisor, while JPMorgan Chase & Co. (NYSE:JPM) is co-financial advisor. (Additional reporting by Richard Pullin in Sydney)
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