By Shayndi Raice, Eyk Henning and Eric Sylvers
Germany's HeidelbergCement AG and Italian rival Italcementi SpA
are discussing a combination, according to people familiar with the
matter, in a deal that would further consolidate Europe's
building-materials industry.
Italcementi had a market value Tuesday of EUR2.3 billion ($2.5
billion), meaning that, with a typical takeover premium, a tie-up
could value it at more than $3 billion should the company be bought
out in full.
Details of the combination the companies are discussing couldn't
be learned.
HeidelbergCement had a market capitalization of EUR13.3
billion.
A transaction would come amid a reshaping of Europe's cement
sector. Last week, Switzerland's Holcim Ltd. and France's Lafarge
SA completed a $40 billion merger. Also, French building-materials
group Saint Gobain SA is in the process of taking over
Switzerland's Sika AG, a maker of chemicals used in the building
and construction industry.
Including debt, a deal could value Italcementi around $6
billion, one of the people said.
HeidelbergCement, currently the world's number four cement
producer, last year recorded revenue of EUR12.6 billion. A deal
with Italcementi could help the company expand in emerging markets
in Europe, Northern Africa and the Middle East.
Italcementi, formally ItalcementiFabbriche Riunite CementoSpA
Bergamo, is the world's fifth-largest cement producer with a
production capacity of more than 60 metric million tons, according
to its website. It recorded a EUR50 million net loss on roughly
EUR4.2 billion in revenues last year.
HeidelbergCement last year agreed to sell its Hanson Building
Products unit in North America and the U.K. for $1.4 billion to
reduce its debt pile and sharpen its focus on processing and
refining raw materials for its core cement and aggregates
products.
The operations sold stemmed from HeidelbergCement's nearly $16
billion acquisition of British rival Hanson PLC in 2007. The deal
left the company with more than $13 billion in debt.
HeidelbergCement and Italcementi are no strangers. Both signed a
licensing agreement for joint use of cement binders developed by
Italcementi.
A combination of Italcementi and HeidelbergCement would be the
most logical next step in the industry given their complementary
geographical footprint, analysts from investment bank Natixis said
in a note April.
Such a deal has a "strong probability," they added, cautioning
that the Pesenti family, which owns a large stake in Italcementi,
may wait for the Italian building market to recover before
considering a disposal. They expect such a recovery next year.
Write to Shayndi Raice at shayndi.raice@wsj.com, Eyk Henning at
eyk.henning@wsj.com and Eric Sylvers at eric.sylvers@wsj.com
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