Cemex S.A.B. de C.V.
Deal would expand CEMEX presence in key fast-growing states such as Florida, Nevada and Arizona
Cemex’s bid to acquire rival Rinker Group Ltd. (RIN. AX, NYSE: RIN) has the high drama of a John Grisham novel, with as many plot twists and turns. On May 4, Rinker investors held back from accepting Cemex’s unsolicited $14.25-billion offer, apparently believing that the Mexican firm undervalued the Sydney-based company amid expectations of a recovering U.S. housing market later this year. The company reported better-than-expected earnings on April 30, and said that profit in the current year may fall less than 10% as it counters a housing slump with road and infrastructure work.
The Mexican cement giant’s cash offer of $15.85-per-share was due to expire Mar. 30, but was extended until April 27. Yet Cemex (NYSE: CX) said it has only garnered 1.7% of the stock, only a fraction of the 90% minimum acceptance condition, despite Rinker board’s April 11 recommendation. Cemex has since raised last year's offer of $13-a-share by 22%.
Rinker investors were delaying tendering their shares amid optimism the company can weather the U.S. housing slump where it makes 85% of its earnings. They were also awaiting a sign from Sydney-based fund manager Perpetual, Rinker’s single largest investor, with a 10.5% company stake.
On May 7, however, Perpetual agreed to accept Cemex's amended offer "as soon as practicable," according to a company statement. Its endorsement is expected to act as a catalyst for other major investors accepting the takeover offer.
Cemex, meanwhile, extended its offer by three weeks to June 8, while waiving a 90% acceptance mandate if its holding exceeds 50% by that date. Analysts speculate that the lowered minimum acceptance played a large role in Perpetual’s acceptance of the deal, making certain it would get to the finish line. Cemex additionally said that shareholders could keep Rinker's final $0.25-a-share Australian dollars dividend.
"We are pleased that Perpetual has agreed to accept the Cemex offer," said Cemex Chief Executive Lorenzo H. Zambrano in a written statement. "The Cemex offer for Rinker shares has the unanimous recommendation of the Rinker Board and is now supported by Rinker's largest shareholder."
Cemex, if successful, must divest 39 ready mix concrete, concrete block, and aggregate facilities in Florida and Arizona as per an anti-trust order from the U.S. Dept. of Justice. The assets are being valued between $300 million and $500 million by Goldman Sachs JB Were. The takeover would create the world's largest cement producer with $23.2-billion in annual revenue and 67,000 employees.