Italcementi has acquired a 6.25% stake in West China Cement (WCC), which it says is the largest player in Shaanxi Province. The asset swap arrangement saw Italcementi exchange its 100% ownership of Shaanxi Fuping Cement Company - a manufacturer it acquired in 2007 - for the stake in WCC. The deal makes Italcementi WCC's third largest shareholder and will give it a seat on the Chinese company's Board of Directors.
The transaction is based on a gross valuation for Fuping of € 87 million (US$ 114 million). Its value, less debt is put at € 26 million (US$ 32 million).
WCC is listed on the Hong Kong stock exchange and has a capitalisation of € 780 million (US$ 1.02 billion). Under the terms of the deal, Italcementi will underwrite the issue of 284.2 million new shares in the company at HK$ 2.1815 (US$ 0.281) per share, for a total value of HK$ 620 million (US$ 80 million).
WCC has cement plants in Shaanxi province and the western Xianjiang autonomous region, with a total capacity of 20 million tonnes per year. The company said this was due to rise to 24 million tonnes by the end of this year. WCC had revenues of € 380 million (US$ 500 million) last year, with a net profit of € 80 million (US$ 105 million).
Italcementi chief operating officer Giovanni Ferrario said, "Thanks to this transaction Italcementi Group will reinforce its presence in China, the world's largest building materials market, and is pleased to enter into partnership with one of the principal private sector operators in the country, leader in Shaanxi province and with an attractive development strategy targeting other high growth regions in Western China."