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Mining and building materials group Afrimat has inked a roughly R1 billion deal to acquire the SA unit of the world’s largest building materials group Holcim. The group’s shares surged by double-digits, with one analyst describing it as a “sweet deal.”
The deal will see Afrimat, valued at about R9.2 billion on the JSE, pay $6 million (about R110 million) for Lafarge South Africa, as well as take on its R900 million in debt. Lafarge offers a range of products to the SA construction industry, including aggregates, concrete, cement and fly ash – which can increase the durability of concrete – with the acquisition forming part of Afrimat’s goal of growing its local footprint.
Lafarge SA had a net asset value of R1.4 billion at the end of its year to end-December, when its core profit slumped to R38 million, from R311 million in 2021.
Swiss-based Holcim was formed out of the 2015 merger between France’s Lafarge and the original company, which was renamed Holcim in 2021. The company had been paring back its operations in developing countries in order to focus on mature markets, including North America.
Bloomberg reported in 2019 it was weighing the sales of its Middle East and African businesses, which accounted for 8% of its sales in 2022, when the group also divested out of Brazil, Zimbabwe and India.
Small Talk Daily’s Anthony Clark said while his understanding is that Lafarge South Africa “is reasonably well-managed” it has also been “ignored” by its overseas parent.
“Afrimat gains leading national market share once Lafarge aggregates is combined with its own business giving cost efficiencies and some strategic new minerals needed in the cement blending market,” he said in a note. The deal was about aggregates, and not cement, said Clark, but he added: “I’d closely watch the plans Afrimat has for cement.”
Should Afrimat improve the margins of the business, which given its track record is likely, the deal could be CEO Andries Van Heerden’s best yet, said Clark. “This is a sweet deal.”
Shares in Afrimat surged 12% in morning trade on Tuesday and have gained almost a fifth in the year to date. Click here for details of its shares as well as other info.
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