Ireland's CRH trims cement ambitions

27 November 2002

Ireland's CRH is said to have tabled an offer to acquire a 34 per cent stake in Misr Beni Suef Cement Company, after indicating earlier this year that it would be interested in a 100 per cent takeover. The news of the reduced offer came in an

18 November statement by Misr Beni Suef to the Cairo & Alexandria Stock Exchanges (CASE).

CRH, one Europe's leading building materials companies, in June made a conditional offer to acquire all 15 million shares of Misr Beni Suef for £E 20 ($4.3) a share. The deal would have also entailed the buyer taking over the company's

E 535 million ($116 million) net liabilities, giving a total entity value of £E 835 million ($182 million). The Irish firm was given a five-month exclusive negotiating period, during which it was to conduct due diligence. The deal was conditional on Misr Beni Suef starting up its first kiln

(MEED 5:7:02).

Misr Beni Suef says that the new offer is still based on a total entity value of

E 835 million. The company also says that the reduction in the number of shares CRH wants to buy is a result of developments in the Egyptian cement market, rather than anything relating to the company itself. It notes that the first production line, which has capacity of 1.4 million tonnes a year (t/y), started up on schedule in October.

The market price for Egyptian cement has fallen sharply over the past six months, from about £E 190 ($41) a tonne to £E 120 ($26). The fall is attributed to declining demand and the start-up of new production capacity - including that of Misr Beni Suef. Total output capacity in Egypt is now some 31 million t/y, compared with domestic demand of only about 25 million t/y.

However, analysts say it is unlikely that CRH's decision was primarily affected by current market conditions. 'I would assume that CRH based its conclusion on the results of the due diligence, rather than on any change in its perception of the market,' says HSBC equities analyst Taher Gargour. 'Misr Beni Suef is one of the smallest producers and it is not in an ideal location as it is far from the main markets in Cairo and the Delta. It also faces tough competition in Upper Egypt from Cemex in particular.'

Cemex of Mexico acquired Assiout Cement Company in 1999, and is producing some 4 million t/y of cement. CRH has declined to make any comment on the Misr Beni Suef offer.

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