Lafarge Board of Directors, chaired by Bruno Lafont, met on December 9, 2007 and approved the acquisition of Orascom Construction Industries Cement Group and the principle of board representation for Groupe Bruxelles Lambert and Nassef Sawiris, majority shareholder with his family of Orascom Construction Industries.
Lafont commented: “This acquisition of a leading Egyptian group is a decisive opportunity to accelerate our profitable growth strategy in cement in emerging markets. As a result of the transaction, 65% of Lafarge’s EBITDA is expected to be generated in emerging markets by 2010, relative to 45% in 2007. Orascom Cement’s positions are concentrated in a fast-growing region that will fully benefit from the boom in oil and natural gas revenues. The two companies are wholly complementary geographically with considerable potential for synergies. We will create a powerful operational regional center in Egypt.
"Through this acquisition, Lafarge is considerably strengthened, with a presence in all of the fastest-growing regions of the world and boosted multicultural teams. This transaction allows us to substantially raise our 2010 financial targets for EPS, ROCE and free cash flow.
"The Group’s transformation is accelerating. Lafarge is well prepared to enter this new growth phase, become the best performing player in the sector in terms of growth, costs and results, and be the leader in emerging markets.
"I am delighted with Nassef Sawiris’s long-term commitment as a shareholder of Lafarge and him joining the Board of Directors. This is a strong sign of confidence in the future of our Group.
"I am also very pleased about Groupe Bruxelles Lambert’s support of our strategy, which enables this transaction to take place in very good conditions. Groupe Bruxelles Lambert joining our Board of Directors is very good news for Lafarge and is something that I have wished for.”
Orascom Cement is an emerging markets Cement leader, with number-one positions in the key markets of Egypt, Algeria, United Arabs Emirates and Iraq and with strategic positions in other growth markets in the region: Saudi Arabia, Syria and Turkey. Orascom Cement also has positions in several high-potential markets in Africa and Asia, including South Africa, Nigeria, Pakistan and North Korea.
Orascom Cement operates ten new or recent, state-of-the-art highly efficient and low cost production facilities, with a production capacity of 35 million tons at the end of 2008. Several plants are also under construction, which will bring total capacity to 45 million tons by 2010. Orascom Cement has a wealth of talented human resources, with a unique experience in developing cement activities in emerging markets.
Orascom Cement enjoys superior growth, profitability and cash generation. In 2008, revenues and EBITDA are estimated at $2.6 billion and $1.3 billion, respectively, with significant growth potential in the years ahead. Over the 2007-2010 period, its sales are expected to increase by 30% and its EBITDA by 33% per year. Operating margin in 2008 is expected to exceed 40% and the company’s cash conversion rate (cash flow/EBITDA) is greater than 90%, particularly thanks to a very favorable tax situation.
Orascom Cement provides Lafarge with unparalleled exposure to the Middle East and Mediterranean Basin, a region with exceptional growth potential driven by buoyant oil and natural gas revenues, strong economic and demographic growth, rapid urbanization and immense infrastructure needs.
With this acquisition and Lafarge’s current construction program of 45 million tons, the Group will add a total of 90 million tons of production capacity located mainly in emerging markets. This operation marks a decisive step in the Group’s cement strategy, accelerates growth, creates the best performing player in the sector, enriches our pool of talents and opens new possibilities for future development.
Significant synergies of more than €150 million a year from 2010 have already been identified. They notably concern improving technical performances, increasing production capacity of existing plants and optimizing procurement.
Lafarge will acquire Orascom Cement for €8.8 billion and will assume €1.4 billion in net financial debt of Orascom Cement. The purchase price is to be financed by debt for €6.0 billion and by the issuance of 22.5 million new shares issued to Nassef Sawiris at a price of €125 per share, i.e. a reserved capital increase of €2.8 billion. The financing of the acquisition has already been committed by BNP Paribas, Calyon and Morgan Stanley.
