Thailand based Siam City Cement Public Company (SCCC) has agreed to purchase a 65% stake in cement manufacturer Holcim (Vietnam) (HVL) from French headquartered LafargeHolcim, according to an SCCC statement.

It said the transaction is subject to customary regulatory and shareholder approvals, as well as to a right of first refusal of LafargeHolcim's joint venture partner, and is expected to close in the fourth quarter of 2016. 

Shareholders of SCCC are expected to vote and give final approval at a specially convened meeting within the next few weeks, said a company official who asked not to be named.

Top executives from SCCC have not commented publicly on the details of the agreement.

The deal valued at US$856 million is being advised by Linklaters. The remaining 35% stakeholder in the HVL joint venture is the Vietnam Cement Industry Corporation, who is not expected to object to the transaction moving forward.

The source of funding for the transaction is via credit facilities support from the Bank of Tokyo-Mitsubishi UFJ, Ltd with a 12-month term.

HVL currently operates one integrated plant and four grinding plants with an annual cement capacity of 6.3 million metric tons. HVL is also a leading ready-mix concrete producer operating seven plants in the south of Vietnam.

In 2015, the company recorded a net profit of US$25 million with revenues hitting US$247 million.

According to SCCC, the acquisition of HVL will allow it to diversify its cash generation from higher growth markets and represents a unique opportunity for higher total shareholder return on equity (TSR) and results in a faster growth in its market capitalization.

In addition, HVL will serve as additional captive channel for SCCC’s clinker in Vietnam and reduces its dependence on conventional export markets. Several synergies will also be created, such as procurement from pool purchasing, increase utilization of IT system and technical knowledge sharing.

The HVL deal is the latest acquisition effort by SCCC this year. In July, SCCC bought a 98.95% stake in Sri Lanka’s Holcim (Lanka) and its subsidiaries. The deal was also advised by Linklaters.

In another deal, SCCG earlier agreed to acquire an 85% stake of Prime Group (Vietnam) shares for a price of US$217 million.

The latest deal to acquire control of HVL clearly illuminates SCCC’s goal to control cement manufacturing market in Vietnam once all of the formalities are complete and the transaction goes through.

It leaves little doubt in the minds of industry circles as to who the uncrowned king of cement in Vietnam is. 

VOV