Lafarge plans $3 bln buyout of US unit
Mon Feb 6, 2006 5:08 AM ET
PARIS (Reuters) - France's Lafarge said on Monday that it planned a $3 billion cash offer to buy the 46.8 percent it does not own in Lafarge North America Inc., in a move to streamline its operations and enhance its earnings.
The world's biggest cement maker intends to offer minority shareholders $75 in cash per Lafarge North America share, representing a 16.7 percent premium over the stock's closing price on Friday, Lafarge said in a statement.
The announcement pushed Lafarge shares 3.1 percent higher to 89.20 euros by 8:30 a.m. British time, their highest intraday level in nearly 3-1/2 years.
Analysts welcomed the move, saying it would simplify Lafarge's structure and allow it to increase profits without the risks linked to a large acquisition.
"This deal uses up Lafarge's immediate firepower in a way which is value-adding and very low risk, as it isn't buying anything not already consolidated, merely the minority," said Merrill Lynch analyst Ken Rumph.
Rumph expects the deal to increase Lafarge's 2006 and 2007 earnings by 7 percent and 6 percent respectively.
The purchase, which will allow Lafarge to benefit fully from a pick-up in cement demand in North America, will be financed entirely through debt and is expected to boost earnings per share immediately, Lafarge said.
"This transaction makes strategic sense for Lafarge because it will enable us to pursue business and growth opportunities in North America even more effectively," newly appointed Chief Executive Bruno Lafont said in the statement.
"It makes operational sense because it will streamline and accelerate decision-making, free of the complexity of operating through a partially owned, publicly traded subsidiary.
"And it makes financial sense, because it will enable us to improve the use of free cash flow at group level and should be immediately accretive to our earnings per share," he said.
Lafarge's buyout plans follow a number of deals in the industry -- such as Holcim's $1 billion move to build a 35-percent stake in Gujarat Ambuja Cements Ltd last week -- as companies in the sector seek to make the most of booming construction in countries such as the United States and India.
Lafarge, which is holding a conference call at 1 p.m. British time (www.lafarge.com), said it intended to start the tender within two weeks.
Lafarge North America reported a 48.5-percent jump in fourth-quarter net income to $144.6 million last week. Its stock closed at $64.25 on Friday.
JPMorgan and BNP Paribas are Lafarge's joint financial advisers, and Cleary Gottlieb Steen & Hamilton LLP is acting as legal adviser to Lafarge in connection with the tender offer.
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