CRH nods to Yatai stake sale
Updated: 2008-01-31 10:32
CRH Plc, the world's second biggest maker of building material, will pay 2.1 billion yuan for a stake in the cement unit of Jilin Yatai (Group) Co, tapping into China's construction boom.
Dublin-based CRH will acquire 26 percent of the cement maker and also have an option to pay two billion yuan for another 23 percent in the unit based in the northeastern province of Jilin, the Chinese parent said in a statement to Shanghai's stock exchange yesterday.
CRH follows Lafarge SA and Holcim Ltd, the world's two biggest cement makers, in buying stakes in companies in China, the world's biggest producer and consumer of cement. Switzerland-based Holcim earlier this month won government approval to buy as many as 160 million shares in Huaxin Cement Co, its only Chinese affiliate.
"Yatai presents a good opportunity for CRH to enter the northeastern cement market, which isn't very well developed yet," said Hong Liang, an analyst at China Galaxy Securities Co in Beijing who has a "buy" rating on Jilin Yatai's shares. "It's a region where foreign capital has yet to really enter the cement industry."
Jilin Yatai's spokesman and board secretary Tian Kuiwu wasn't immediately available for comment.
Jilin Yatai is one of 12 national-scale cement makers chosen by the government for preferential treatment as it consolidates the industry by eliminating one-third of producers nationwide through 2010.
CRH in 2006 first announced plans to acquire Jilin Yatai without disclosing the financial terms. The company may seek further acquisitions in China, Finance Director Myles Lee said in February.
The Jilin Yatai purchase gives CRH access to four plants with a capacity of about nine million tons a year, CRH said in 2006. In the same year, it also announced it had acquired the Harbin Sanling cement plant, also in northeastern China, which can produce 650,000 tons a year.
Lafarge has bought several Chinese producers including Sichuan Shuangma Cement Co, giving it a production capacity in China of 21 million tons at the end of 2005, according to the Paris-based company's website.
CRH will have the option to buy further stakes in Jilin Yatai's cement unit within four to six years after the completion of its first purchase, according to yesterday's statement. The company didn't name the regulatory bodies responsible for approving the agreement.
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