Monterrey, Mexico-based cement giant Cemex S.A.B de C.V. will get $600 million in restitution from Venezuela, about half of the $1.2 billion it had sought, after President Hugo Chávez nationalized its assets in 2008.
Under the Dec. 1 deal, the firm will get $240 million in cash and $360 million in various negotiable securities issued by state-owned oil giant, Petroleos de Venezuela, S.A. Cemex's Venezuelan operation consisted of 4.7 million tonnes of cement capacity, including 10 land-based and seven marine terminals, 33 ready-mix concrete plants and seven aggregate quarries.
"If we assume a valuation of around $200 million for the assets other than the cement capacity, this suggests a value per tonne of cement capacity of around $190, which is reasonable in our view," reported Mike Betts, an analyst with Jefferies International Ltd., London, in an investor note.
Cemex had rejected the government's $650-million offer for Cemex's 75.7% share three years ago, but a global economic slowdown and billions in mounting debt from past expansions changed its outlook, observers say. Venezuela similarly nationalized smaller-capacity units of rival cement giants, Lafarge S.A., Paris, and Swiss-based Holcim Ltd., but both firms agreed in 2009 to compensation of $267 million and $552 million, respectively. "Cemex got hurt by holding out for a better deal that never came," says Garik Shmois, an analyst with Longbow Research, Independence, Ohio.
Cemex stock jumped 8.2% to $4.76 on news of the deal, although its share price is down 57% from its 52-week average high of $11.15. The firm got a $240-million down payment on Dec. 7, with the remainder to be paid over four years. The agreement also cancels $154 million in accounts payable by Cemex subsidiaries to Cemex Venezuela, and nullifies a World Bank arbitration the company had filed following the takeover. The government seized construction supply production as part of a Chávez initiative to build 2 million housing units for the country's poor over the next several years.
Venezuela's per-capita cement consumption has doubled since the sector was nationalized into Corporacion Socialista del Cemento, S.A., increasing by 595 pounds per person annually, said Industry Minister Ricardo Menendez. The nationalization spree, which affected assets in oil, telecommunication and other sectors, resulted in 20 still-pending World Bank arbitration cases.
Cemex listed the book value of its Venezuelan assets as $493 million at the end of the third quarter, according to regulatory filings. Cemex still plans to raise $1 billion in asset sales through the first quarter of 2013.
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