Ireland's CRH makes its move in Egypt

05 July 2002

Ireland's CRH, one of Europe's leading building materials companies, has made a conditional offer to acquire Misr Beni Suef Cement Company, a newly established local venture that has been looking for an injection of capital for some time (MEED 23:2:01).

The stock exchange on 27 June announced that CRH had offered £E 20 ($4.3) a share for all 15 million of the shares in Misr Beni Suef. The deal would also entail taking over the company's £E 535 million ($116 million) net liabilities, and is based on a total entity value of £E 835 million ($181.5 million). Any increase in the net liabilities during the due diligence and negotiating period would result in a corresponding decrease in the price to be paid for the shares. Misr Beni Suef has been trading at about £E 15 ($3.3) in recent weeks.

CRH has stipulated that it should have a five-month exclusive negotiating period, and that due diligence should be completed within three months. It has also specified that the deal is conditional on the full operation of Misr Beni Suef's first kiln, which is scheduled to start up in the fourth quarter. CRH has said it wants to purchase 100 per cent of the company's shares, or a minimum of 75 per cent.

Misr Beni Suef was founded in 1997 by a group of local investors led by Banque Misr. The contract to build its first line, with a capacity of 1.4 million tonnes a year of cement, is being carried out by the US arm of Denmark's FL Smidth. Talks about the sale of a strategic stake had earlier been held with a number of firms, including FL Schmidt and Italy's Italcimenti.

CRH made its first foray into the Egyptian market in mid 2001 when it bid for a stake in Suez Cement Company. That deal was won by France's Ciments Francais. CRH reported total turnover of Eur 10,400 million ($10,200 million) in 2001. The acquisition of Misr Beni Suef would be its second in the East Mediterranean region. In 2001, it bought a 25 per cent stake in Israel's Mashavbuilding materials group.

Other international companies active in the Egyptian cement sector include Switzerland's Holcim, France's Lafarge, Greece's Titan, Portugal's Cimporand Mexico's Cemex. Production has expanded rapidly over the past five years and has now reached about 27 million tonnes a year. However, demand growth has slowed down, and production and supply are now roughly in balance.

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