Copy of the article for those interested (Noirua)
,
Cemex Gets U.S. Backing for $11.7 Billion Rinker Bid (Update2)
By Thomas Black and Miriam Steffens
April 4 (Bloomberg) -- Cemex SA, the world's third-largest cement producer, received clearance from U.S. antitrust regulators for its $11.7 billion hostile offer for Australia's Rinker Group Ltd.
The Justice Department said Cemex agreed to sell 39 facilities, including eight Cemex plants, in Florida and Arizona to preserve price competition for large transportation projects in the two states. Sydney-based Rinker, a building materials maker, gets about 80 percent of its sales in the U.S.
Cemex, based in Monterrey, Mexico, needed U.S. regulatory permission to move forward with the offer. It still must convince major shareholders of Rinker, who say the offer is too low. Cemex may increase its Oct. 27 bid of $13 per share, said such investors as Tony Trzcinka at Pax World Management Corp. in Portsmouth, New Hampshire.
``There's definitely a feeling Cemex will have to raise the price for Rinker,'' Trzcinka, who helps manage $2.3 billion, including Cemex shares, said in a March 28 interview. ``If they have to come up 15 percent to 20 percent and it's still accretive to earnings, then we like the deal.''
Rinker would be the largest acquisition by Cemex, which paid $5.8 billion in cash and debt for the U.K.'s RMC Group Plc in March 2005. It marks Chief Executive Officer Lorenzo Zambrano's first attempt at a hostile bid since he began acquiring companies two decades ago.
Annual Sales
The purchase would boost Cemex's annual sales to almost $24 billion from $18.2 billion last year and widen its lead in the U.S. cement market. More than 60 percent of Rinker's sales of concrete, gravel, asphalt, concrete blocks and other building materials come from Florida, Arizona, Nevada and Texas.
Under the Justice Department settlement, Cemex would sell 32 ready-mix concrete and concrete block plants in Florida and seven ready-mix concrete and gravel facilities in Arizona.
The facilities would be sold to a single buyer in the areas designated by the department, which must approve any transactions. The U.S. District Court in Washington has to accept the settlement, the department said.
``The department's action will ensure that these customers will continue to receive the benefits of competition,'' said Thomas O. Barnett, assistant attorney general for the antitrust unit, in a statement.
`Opportunistic' Offer
Cemex said in December its offer was `full and fair.''
Rinker management has called the bid ``far too low'' and ``opportunistic'' because it followed a six-month, 38 percent slide in its stock. On Rinker's Web site, large white letters on a scarlet background spell out ``reject,'' and invite investors to read why they shouldn't tender shares.
Rinker Chairman John Morschel said on Nov. 29 that Grant Samuel & Associates Pty. valued the company at as much as A$23.04 a share, 36 percent more than Cemex's original offer of A$17. That offer, made in U.S. dollars, has since declined to A$16 because of a stronger Australian currency.
Rinker investors such as Rob Patterson at Argo Investments Ltd. in Adelaide, Australia, are holding out for a higher bid.
Fourth-Largest Investor
``At this stage we wouldn't be accepting the offer,'' said Patterson, who helps manage $3.2 billion at Argo. He holds 3.2 million Rinker shares, the company's fourth-largest investor.
Perpetual Investments, the biggest shareholder with a stake large enough to block the bid, has repeatedly said the bid was too low considering the value of Rinker's assets.
Investors are confident about Rinker's future even with a U.S. housing slump that has struck particularly hard in Florida, its largest market, Argo's Patterson said in a March 28 interview.
``Housing statistics are not favorable at the moment, but that's a short-term issue,'' he said. ``Rinker has a strong market position in the more growth-oriented states.''
`Attractive Premium'
Rinker shares closed at A$18.07 yesterday in Sydney. The stock has dropped 7 percent since reaching a high of A$19.48 on Feb. 20 after U.S. housing data cast doubt on Rinker's forecast that demand will start to recover by May.
Rinker's American depositary shares, which represent five shares, fell 9 cents, or 0.1 percent, to $73.69. Cemex shares trading in New York fell 59 cents, or 1.8 percent, to $32.65.
U.S. new-home sales fell to the lowest level in almost seven years in February, the Commerce Department said on March 26, dimming prospects for a quick recovery.
With a U.S. housing downturn and no rival suitor, Cemex may not need to raise its bid, said Gonzalo Fernandez, an analyst with Santander Central Hispano Investment in Mexico City. Rinker shareholders risk having shares decline to levels before the offer if Cemex withdraws, he said.
``Cemex is offering an attractive premium,'' Fernandez said in an April 2 interview. ``For some investors, it will be compelling to take this premium now for a value that could take some time to reach.''
Analysts at Macquarie Bank Ltd. in Sydney said Vulcan Materials Co.'s $4.6 billion acquisition of competitor Florida Rock Industries Inc. in February was further proof Cemex's offer is too low. Birmingham, Alabama-based Vulcan valued Florida Rock, which sells products similar to Rinker, at 11.2 times earnings before interest, taxes, depreciation and amortization. Cemex's bid values Rinker at 9.2 times earnings before tax.
``This will put huge pressure on the Cemex bid and suggests that the offer is far too low,'' the Macquarie analysts said in a Feb. 21 note to clients.
Cemex is being advised by Citigroup Inc. Rinker has hired UBS AG.
To contact the reporters on this story: Thomas Black in Monterrey at
tblack@bloomberg.net and Miriam Steffens in Sydney at
msteffens1@bloomberg.net