LafargeHolcim unit snapped up
LafargeHolcim sells its local unit to the country’s largest producer
Indonesia’s biggest cement maker, Semen Indonesia, is buying the local unit of Swiss rival LafargeHolcim for about $917m, as it seeks to extend its dominance in Southeast Asia’s largest market.
Indonesia’s biggest cement maker, Semen Indonesia, is buying the local unit of Swiss rival LafargeHolcim for about $917m, as it seeks to extend its dominance in Southeast Asia’s largest market.
Semen Indonesia said it has signed a deal to acquire LafargeHolcim’s 80.6% stake in PT Holcim Indonesia, the third-biggest cement producer in the country.
A fully owned subsidiary of the state firm will launch a mandatory offer for the remaining shares owned by public shareholders, it said.
“In the competitive environment of national cement industry, the combination between Semen Indonesia and Holcim will be stronger and larger,” said Hendi Prio Santoso, president director of Semen Indonesia.
Sources familiar with the matter said Malaysian infrastructure company YTL Corporation and privately owned Chinese firm Hongshi Cement were also among the final bidders, but the strategic fit with Semen Indonesia helped LafargeHolcim’s Indonesian unit to win the auction.
The initial round of the auction drew interest from about a dozen companies, including from Japan, the Philippines and a number of other countries, the sources said.
YTL and Hongshi declined to comment on the deal.
A spokesperson for LafargeHolcim said that it had received strong interest from bidders for its Indonesian business, but declined to give particulars on specific parties.
Though Indonesia President Joko Widodo’s infrastructure push has fuelled a boom in building of airports, roads and housing projects, an aggressive expansion in the industry and entry of newer players such as Anhui Conch Cement has created excess capacity and a price war in the past few years, analysts say.
Semen Indonesia has secured financing from local, regional and international banks such as BNP Paribas, said the sources who declined to be named as complete details of the deal have not been announced.
“This secures Semen Indonesia’s position as a market leader for many years. Cement prices are improving and there is significantly less new capacity coming,” said one source.
In an August report on potential consolidation in the Indonesian cement industry, Deutsche Bank analysts said that “a bull-case scenario would be that domestic consolidation reduces the number of players competing in the overcapacity market, supporting higher average selling prices and a profitability recovery”.
“A bear-case scenario would be a prolonged condition in which the industry loses its pricing power due to the new players’ strategy to overtake market share,” the report read.
Semen Indonesia said the acquisition will give it a significantly larger capacity and broader product portfolio and geographical footprint.
LafargeHolcim said it is selling the business as it reviewed its portfolio to improve its financial strength. LafargeHolcim’s local unit has four cement plants and 30 ready-mix plants, Semen Indonesia said.
The company was advised by Citigroup, while LafargeHolcim was advised by BNP Paribas.