THE ACQUISITION OF HOLCIM WILL LEAD TO LOWER PRICES OF CEMENT | Marvin Germo

THE ACQUISITION OF HOLCIM WILL LEAD TO LOWER PRICES OF CEMENT

By: Marvin Germo | May 16, 2019

Lower Cement Prices  

San Miguel Corporation’s (SMC) recent acquisition of the majority stake in Holcim Philippines is expected to lead to lower prices of cement in the country. More collaboration and economies of scale are expected afterward which in turn will affect the current cement prices. Although it is a major event in the industry already, we are still considering the fact that there will be market segmentation and let’s not forget the emerging brands that could offer competitive prices just like any other industries. To add extra information on this, the country continues to import cement which will not affect the healthy competition we have right now in the market.

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Stock Smarts Singapore —  May 18 & 19, 2019
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The Recent Acquisition of Holcim Philippines

Just last week, it was reported that SMC, the largest conglomerate in the Philippines, has bought Holcim Philippines, for $2.15 billion from Lafarge Holcim in Europe. This event was significant for the company as it made SMC the biggest cement player in the country. It was also disclosed on May 10 that Lafarge Holcim has signed an agreement with SMC to acquire 85.7% stake in Holcim Philippines. This would equate to 5.5 billion shares with a per share price of P16.80. Now that the sale has been made, Holcim has declared an exit from the fierce competition in the South East Asian region.

SMC Outperformed Foreign Cement Giants

The recent acquisition just proved that SMC beat foreign giants in the cement industry. It outperformed the Japanese company Taiheyo Cement Corporation and the Siam City Cement in Thailand and Anhui Cement Corporation in China. Lafarge Holcim disclosed that the exit from the stiff competition in South East Asia has not been bad for the fir. In fact, it was based on their portfolio review that they were able to reach a new stage to strengthen their financial capability. Holcim also had a previous transaction with Indonesia, Singapore, and Malaysia. The sale of the stake was done on the purpose of solidifying the balance sheet of the firm.

SMC To Create More Opportunities

After the acquisition, SMC is expected to create more opportunities nationwide as it strengthens its base in the cement industry. The recent expansion of SMC opens new doors not just for the firm itself but for the Philippine economy and investors as well. Because of the transaction, the firm is required to do a tender offer for the Holcim shares which are by the hands of its minority shareholders. The tender offer will be conducted after the final purchase price has been paid. This transaction would undergo the process of Securities and Exchange Commission and the Philippine Competition Commission (PCC).

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