The world’s biggest cement maker, LafargeHolcim Ltd., on Thursday said it was close to finalising a $3.4 billion deal to acquire Firestone Building Products from Japan’s Bridgestone Corporation.
The acquisition, which is the Swiss giant’s biggest in more than a decade, will see it expand into the roofing business in the United States, where the company will be looking to tap the increasing demand for roofs that generate solar energy and cool buildings.
LafargeHolcim also plans to roll out Firestone Building Products beyond America, where it currently generates nearly 90% of its $1.8 billion in annual sales, CEO Jan Jenisch said Thursday.
Also Read: Lafarge to Retain 35% Stake in Continental Blue Cement of Ghana
“We said we wanted to have a fourth leg for our company – building solutions and products – for this we need a bigger acquisition,” Jenisch said. “We needed a platform which had technologies and an innovative product range to kick start this fourth segment and this is exactly what this Firestone business is offering to us.”
LafargeHolcim will use existing cash to finance around half of the purchase while the rest will be funded through issuing bonds. The deal is expected to close in the first half of 2021.
The purchase is part of a growth strategy and signals a change in management approach from cost-saving to consolidation, Bergos analyst Martina Oetiker said, as quoted by Bloomberg. “After strong cost savings and portfolio restructuring over the last years, we are encouraged by this growth initiative.”
Read Also: Turnaround Plan Delivers 91.6% Income Growth for Lafarge in 2019
Since his appointment in 2017, Jenisch has focused on paying down debts, inking smaller deals, and quitting less profitable markets. Reports indicate the chief executive had to slash costs and sell assets in Southeast Asia for this deal to take place.
A similar strategy was employed in the Group’s African unit – Lafarge Africa Plc. The company, which is headquartered, listed, and has operated in Nigeria since 1960, in July 2019 sold off its South African subsidiary in a deal valued at $316.2 million, to pay off a debt of $293 million stemming from a foreign currency loan.
The turnaround plan of Lafarge, mainly selling off the South African business and reducing the cost of capital, has dramatically improved the company’s financial performance over time.
Its financial statement for Q3 2020 shows that Lafarge Africa generated N59.33 billion, surpassing the N45.17 billion made in the corresponding period of the previous year. During this time, gross profit rose to N13.80 billion, surpassing the N12.14 billion it recorded in Q3 2019.
Lafarge Africa Plc. (WAPCO) is currently trading at N22.4, up 0.89% for the day.
