Lafarge makes an expensive bid for leadership on growth frontiers
Every time when oil reaches new highs, dark clouds of
downturn hover around a number of economies. Ironically, of course, that’s welcome news for OPEC nations. Take the instance of the Middle East, where the recent uptrend in oil prices has led to an increased economic revolution. Now the region is expected to pump over $2 trillion in the infrastructure space, indirectly offering enormous potential to cement firms.
In order to capitalise on this big bang explosion, the world’s largest cement maker, Lafarge bought Orascom Cement for a humungous $12.9 billion (with an assumption of $2 billion in net debt) to become the largest player in this province. Orascom’s key advantage is its leadership position in Egypt, UAE, Iraq, Pakistan, South Africa, Saudi Arabia and many other countries across the Middle East and Mediterranean basin. Nassef Sawiris, the biggest shareholder of Orascom will in turn acquire a stake of 11.4% in Lafarge. Lafarge’s share price experienced a quantum jump of 12% on the deal announcement. Annual synergies of €150 million are anticipated.
Bruno Lafont, Chairman and CEO, Lafarge, says, “This acquisition of a leading Egyptian group is a decisive opportunity to accelerate our profitable growth strategy in cement in emerging markets. Orascom Cement’s positions are concentrated in a fast growing region that will fully benefit from the boom in oil and natural gas revenues.”
The deal will add 35 mtpa in 2008 in Lafarge’s armoury and 45 mtpa by 2010, taking its total cement producing capacity to 260mtpa by the end of the decade. Lucy Saint-Antonin, Head of Media Relations, Lafarge spoke to B&E, “Orascom is a great strategic fit for us. Lafarge’s Chairman and CEO Bruno Lafont have quite clearly defined one of the key growth priorities at Lafarge as cement in emerging markets. Going ahead we will continue to aim for both organic & inorganic growth.” At the moment, Asia is the biggest market for Lafarge and accounts for 28% of cement business sales at Lafarge.
Orascom Cement’s acquisition will significantly boost this percentage to a new high; de-risk operations geographically and financially, ultimately adding to its bottom-line significantly. Emerging markets will account for as much as 55% of the combined entity in 2008 and the figure will shoot up to 65% by 2010.
Holcim, Heidelberg, Cemex have also been aggressively investing in Asia and other emerging markets. Holcim’s earlier deals with Huaxin (China), Ambuja Cements Ltd. (India) & Jurong Cement Limited (Singapore) had given it headway, but now Lafarge takes the lead, with an oil connection to boot!
Every time when oil reaches new highs, dark clouds of
downturn hover around a number of economies. Ironically, of course, that’s welcome news for OPEC nations. Take the instance of the Middle East, where the recent uptrend in oil prices has led to an increased economic revolution. Now the region is expected to pump over $2 trillion in the infrastructure space, indirectly offering enormous potential to cement firms.In order to capitalise on this big bang explosion, the world’s largest cement maker, Lafarge bought Orascom Cement for a humungous $12.9 billion (with an assumption of $2 billion in net debt) to become the largest player in this province. Orascom’s key advantage is its leadership position in Egypt, UAE, Iraq, Pakistan, South Africa, Saudi Arabia and many other countries across the Middle East and Mediterranean basin. Nassef Sawiris, the biggest shareholder of Orascom will in turn acquire a stake of 11.4% in Lafarge. Lafarge’s share price experienced a quantum jump of 12% on the deal announcement. Annual synergies of €150 million are anticipated.
Bruno Lafont, Chairman and CEO, Lafarge, says, “This acquisition of a leading Egyptian group is a decisive opportunity to accelerate our profitable growth strategy in cement in emerging markets. Orascom Cement’s positions are concentrated in a fast growing region that will fully benefit from the boom in oil and natural gas revenues.”
The deal will add 35 mtpa in 2008 in Lafarge’s armoury and 45 mtpa by 2010, taking its total cement producing capacity to 260mtpa by the end of the decade. Lucy Saint-Antonin, Head of Media Relations, Lafarge spoke to B&E, “Orascom is a great strategic fit for us. Lafarge’s Chairman and CEO Bruno Lafont have quite clearly defined one of the key growth priorities at Lafarge as cement in emerging markets. Going ahead we will continue to aim for both organic & inorganic growth.” At the moment, Asia is the biggest market for Lafarge and accounts for 28% of cement business sales at Lafarge.
Orascom Cement’s acquisition will significantly boost this percentage to a new high; de-risk operations geographically and financially, ultimately adding to its bottom-line significantly. Emerging markets will account for as much as 55% of the combined entity in 2008 and the figure will shoot up to 65% by 2010.
Holcim, Heidelberg, Cemex have also been aggressively investing in Asia and other emerging markets. Holcim’s earlier deals with Huaxin (China), Ambuja Cements Ltd. (India) & Jurong Cement Limited (Singapore) had given it headway, but now Lafarge takes the lead, with an oil connection to boot!
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