Less than three weeks after the Lafarge Group and Holcim Ltd. merger triggered realignment of cement, concrete and aggregate production in key U.S. and Canadian markets, two European peers outlined an agreement perpetuating the cycle—bringing under one umbrella integrated operators entrenched in multiple states and provinces.
Lehigh Hanson Inc. parent HeidelbergCement announced on July 28 a two-phase plan—presently valued at €3.7 billion [$4.1 billion] and subject to customary conditions—to acquire Essroc Cement Corp. parent Italcementi. With a targeted 2016 closing, the deal would position the combined business as the number one, two and three player, respectively, in the global aggregates (275 million metric tons, annual production), cement (200 million metric tons, annual capacity) and ready mixed concrete (49 million cubic meters, annual production) market. The companies reported 2014 sales totaling €16.8 billion [$18.6 billion] from activities in 60-plus countries.
HeidelbergCement officials characterize the acquisition as a “unique opportunity to accelerate growth. It will add a valuable portfolio of assets with a perfect geographical fit to the existing footprint of the Group. Italcementi operates … across 22 countries with strong market positions in France, Italy, the United States and Canada.”
Echoing the geographical fit, Italcementi officials cite “limited overlap of plants in Belgium and the U.S.” and note “the significant potential for synergies and the combination of strong innovation and R&D capabilities of both companies.”
Essroc Cement is strongest in Mid-Atlantic and eastern-central Great Lakes cement markets, and has integrated cement, aggregate and ready mixed production in Ohio, Pennsylvania, Virginia and West Virginia, plus Ontario and Quebec. Areas of tightest cement market overlap with Lehigh Hanson, based on proximity of mills and terminals, are Maryland, eastern Pennsylvania, southern Indiana and, to lesser extent, New York and Virginia. Among markets where Lehigh Hanson has integrated businesses are Alabama, California, New York, Texas and Washington, plus Canada’s Prairie Provinces and British Columbia.
Outside North America, HeidelbergCement officials point to Italcementi’s emerging-market positions with high growth potential, plus underlying portfolio strength: “Plants are well invested due to a total of €3.5 billion [$3.9 billion] in capital expenditures over the past seven years. [Italcementi] has extensive reserve positions in cement plants and aggregate quarries and shares HeidelbergCement’s philosophy of operating with strong local brands.”
“There is no other major Group in the industry which offers a similar complementary fit to our own operations. With the market recovery gaining traction in Southern Europe and the U.S., it is now the right time for us to accelerate our growth with this transaction,” affirms HeidelbergCement Chairman Dr. Bernd Scheifele. “We see significant potential for value creation with the realization of synergies and the implementation of our proven standards of operational and commercial excellence.”