cemex 90 per cent looks set in concrete

Cemex 90% looks set in concrete

Philip Hopkins
April 12, 2007

CEMEX'S $18 billion-plus takeover bid for buildings material group Rinker is likely to succeed, analysts say.
The Mexican group, the third-biggest building materials company in the world, has increased its cash bid for Rinker from $US13 a share to $US15.85 a share ($A19.41 a share).

This equates to a 23 per cent increase over the initial bid, which was adjusted for the interim dividend of US13¢ a share, and values the bid at $A18.7 billion.

In a note to clients, ABN Amro said Cemex's stipulated 90 per cent acceptance level was likely to be reached given the structure and timing of the offer. The uncertain macro outlook for Rinker, given the sluggish housing market in its key activity areas, Florida and Arizona, was another factor, the research house said.

Similar sentiments were voiced by other key analysts — Deutsche Bank, Macquarie Research and Credit Suisse.

"We think a higher bidder is less likely to emerge given the board's recommendation (to accept)," the ABN Amro analysts said.

Also, approval of the deal by the US Department of Justice last week did not trigger a new entrant to the bidding.

"We once again recognise the impeccable timing of the revised Cemex offer, which has ensured the board's positive recommendation at a time when Rinker is entering a period of earnings decline."

Deutsche Bank said it was possible the Australian Readymix assets would be sold, with the independent experts valuing Readymix at $A2.6-$A2.8 billion.

"We believe there could be several potential buyers of these assets, including Holcim, Adelaide Brighton and Fletcher Building," Deutsche Bank said.

Macquarie Research said Rinker had underperformed the market since the initial offer. "Conditions in Florida remain very tough and the weakness in the US dollar has exacerbated valuation issues," it said. "There is long-term value in Rinker but this is now likely to be recognised by Cemex shareholders … Florida is still an attractive market, despite the current downturn, with strong underlying demographics."

Rinker's shares closed 1¢ higher at $18.82, still 59¢, or 3 per cent, below Cemex's new offer price.