CAIRO: Orascom Construction Industries announced Monday an agreement with Lafarge for the proposed divestment of the OCI Cement Group for a total of $12.9 billion plus the assumption by Lafarge of a $2 billion debt, according to a press statement.
OCI shares initially rose almost 10 percent, but closed down by 4.4 percent. Egypt’s benchmark stock index saw its sharpest single-day drop in almost four months on Monday as investors dumped shares of OCI after the deal was announced.
Lafarge shares surged 8 percent to 116.31 euros in early trade, its highest level since late October, valuing it around 20 billion euros, slightly above Swiss rival Holcim.
The OCI Board of Directors intends to return approximately $11 billion of the proceeds of the divestment to its shareholders. The company said it will focus on accelerating the development of its construction operations and investments in infrastructure and natural gas industries.
As part of the transaction, the statement read, NNS Holding – a family investment holding company controlled by Nassef Sawiris – will subscribe for 22.5 million new shares in Lafarge at a price of 125 euros per share.
To finance the acquisition, Lafarge will sell Orascom shareholder Nassef Sawiris an 11.4 percent stake in Lafarge for about $4.1 billion. It will also borrow about $8.8 billion “This transaction allows us to focus all of our resources on developing our construction, infrastructure and natural gas operations which we believe currently have unprecedented growth opportunities, said Sawiris in the statement.
An additional amount of $2 billion will be invested to capitalize on the attractive growth opportunities in these areas, the company said.
In addition to his current role as chief executive officer of OCI, Sawiris will also become a member of the Lafarge board of directors.
“[This agreement] recognizes the significant value created in our cement business and allows us to reward our shareholders with a substantial return of cash. The Cement Group and its employees will also benefit from being part of the leading building materials group in the world with the financial strength and geographical diversity to continue to prosper, added Sawiris.
According to the Associated Press, Lafarge CEO Bruno Lafont told reporters at a news conference Monday that discussions began a few months ago.
Orascom shareholders will be asked to approve the deal in early January 2008, and Lafarge shareholders will vote on creating new shares for the Sawiris family at the end of January. The deal should be completed by the end of March, pending approval of competition authorities, the company said.
Belgian company Groupe Bruxelles Lambert, the investment company of billionaire Albert Frere, will also join Lafarge s board of directors.
Lafarge said the acquisition would give it a leading position in the Middle East and Mediterranean basin and would result in synergies of more than 150 million euros a year.
With this acquisition, we are not changing direction, Lafont said. We are following what we were doing on a bigger scale, and faster.
OCI and Lafarge have also singed a cooperation agreement to allow both groups to continue benefiting from the mutual synergies in the construction of cement plants.
France’s Lafarge – the world’s leading cement maker – operates in over 70 countries. It reported sales of 17 billion euros and a net income of 1.4 billion euros in 2006.
Currently, OCI is active in over 100 construction projects in more than 20 countries. It is also one of the region’s largest manufacturers of fabricated steel products and has strategic investments in natural gas industries.
The funds from the divestment will go to implementing the group’s growth and investment plan.
The Cement Group includes all cement, aggregates, ready-mix concrete and cement bags manufacturing operations. It owns and operates plants in Egypt, Algeria, northern Iraq, Pakistan, UAE, Turkey and Spain, with a combined annual production capacity of almost 35 million tons. New investments in Nigeria, Saudi Arabia, Syria and North Korea and South Africa will increase this capacity to 45 million tons by 2010.
Consolidation in the industry began in 2001 when Lafarge bought Britain s Blue Circle Industries PLC $9.1 billion. That was followed by Cemex buying RMC Group PLC for $6.1 billion in 2004 and Switzerland s Holcim taking over Aggregate Industries PLC for $4.5 billion in 2005.
