CRH, one of Europe's leading building materials companies, originally tabled a conditional offer to acquire all 15 million shares of Misr Beni Suef for £E 20 ($3.60) each in June last year. CRH later scaled back its offer to a 34 per cent stake, basing the offer on a total entity value of £E 835 million ($150 million).

Declining domestic demand and the start-up of new capacity has seen the market price for Egyptian cement fall sharply over the last year, dropping from about £E 190 ($34) a tonne to £E 120 ($22) in the last six months of 2002. Total output capacity in Egypt is now about 31 million tonnes a year (t/y), compared with domestic demand of 25 million t/y.

'Even though export facilities are improving, there are still too many small industry players in the market at the moment, Misr Beni Suef being a prime example,' says HSBC equities analyst Taher Gargour. 'That said, the low energy and labour costs and other factors make Egypt a remarkably profitable market and the bottom lines of most producers are quite reasonable - those on the coast such as OCI[ Orascom Construction Industries] are actually making more from the export market than locally, which is practically unheard of. The competition in Upper Egypt is tougher and you'll probably hear a lot of criticism of the CRH offer. But it has a good rationale, and that is that the market is still profitable.'

Misr Beni Suef's chief competitor is the 4 million-t/y Assiout Cement Company, also located in Upper Egypt, which was acquired by Cemexof Mexico in 1999.