HeidelbergCement Agrees to Buy 45% Stake in Italcementi -3rd Update

By Shayndi Raice, Eyk Henning and Eric Sylvers 

Germany's HeidelbergCement AG Tuesday agreed to pay EUR1.67 billion ($1.85 billion) for a 45% stake in Italy's Italcementi SpA in a deal that further consolidates Europe's building-materials industry.

HeidelbergCement will pay EUR10.60 per share to Italy's Pesenti family for their stake in Italcementi and then will later make a tender offer at the same per-share price for the 55% of the Italian cement company that is publicly traded. The price is a 71% premium to Italcementi's average price over the past three months. Tuesday the stock closed 6.4% higher at EUR6.59.

The transaction comes amid a reshaping of Europe's cement sector. Last week, Switzerland's Holcim Ltd. and France's Lafarge SA completed a $40 billion merger. Also, French building-materials group Saint Gobain SA is in the process of taking over Switzerland's Sika AG, a maker of chemicals used in the building and construction industry.

HeidelbergCement, currently the world's No. 4 cement producer, last year had revenue of EUR12.6 billion. Acquiring Italcementi helps the German company expand in emerging markets in Europe, Northern Africa and the Middle East.

HeidelbergCement will pay a mix of cash and shares for the stake owned by the Pesenti family, which through its Italmobiliare investment vehicle will end up owning between about 4% and 5.3% of the German company. Including debt, the deal values Italcementi at about EUR7 billion.

Italcementi is the world's fifth-largest cement producer, with a production capacity of more than 60 metric million tons, according to its website. It had a EUR50 million net loss on roughly EUR4.2 billion in revenue last year.

Annual synergies from the tie-up will be EUR175 million beginning in 2018 at the latest, HeidelbergCement said, adding that the acquisition will create the world's second-biggest producer of cement and the third-largest in ready-mix concrete.

The deal is expected to close sometime next year.

HeidelbergCement last year agreed to sell its Hanson Building Products unit in North America and the U.K. for $1.4 billion to reduce its debt pile and sharpen its focus on processing and refining raw materials for its core cement and aggregates products.

The operations sold stemmed from HeidelbergCement's nearly $16 billion acquisition of British rival Hanson PLC in 2007. The deal left the company with more than $13 billion in debt.

HeidelbergCement and Italcementi are no strangers. Both signed a licensing agreement for joint use of cement binders developed by Italcementi.

The combination of Italcementi and HeidelbergCement would be the most logical next step in the industry, given their complementary geographical footprint, analysts from investment bank Natixis said in a note in April.

Write to Shayndi Raice at [e-mail], Eyk Henning at [e-mail] and Eric Sylvers at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires