RIN rinker group limited

increase offer to cement deal

  1. 2,133 Posts.
    MEXICAN cement giant Cemex may have to increase its hostile bid for Rinker from $16.8 billion to more than $19 billion, despite growing uncertainty about any counter-bid, analysts say.

    During a round of meetings yesterday with major institutional investors, Cemex executives did not rule out raising their company's all-cash bid for Rinker. "(Cemex) didn't make a strong point that this was the one and only offer," one fund manager said. "They really want the asset."

    Rinker's first detailed response to the bid and its financial outlook will be revealed at the company's half-year results briefing on November 9.

    But the analysts' views that a higher bid is in the offing add weight to the decision of investors and hedge funds, who have sent Rinker's share price 9 per cent higher than Cemex's $17-a-share offer in anticipation of a higher offer.

    Rinker shares closed at $18.55 yesterday, down 4¢, after a 26.5 per cent jump on Monday — the first day of trading after the Cemex bid was launched.

    Perpetual Investments was the first stop for Cemex's deal maker, Juan Pablo San Agustin, on his two-day sales pitch to Rinker's shareholders ahead of what could become Australia's largest ever cash takeover.

    Perpetual Investments, which has a 10.4 per cent blocking stake, has called the $17 per share bid undervalued.

    Macquarie Research Equities analyst Andrew Dale said. "We believe that a price around $19.50 per share is required before the market will accept a takeover offer from Cemex.

    "The $17 per share bid is too low especially considering the potential synergies that could be created." The most bullish report came from Merrill Lynch, which branded the offer as "cheeky" and calculated Cemex could raise its bid to $22.40 a share before eating into its cash flows. This would value the transaction at $20.1 billion.

    Cemex has targeted Rinker, Australia's biggest building materials maker, in an effort to tap into its US business, which accounted for up to 85 per cent of earnings last year.

    Cemex has said it can generate annual savings of $US130 million ($A169 million) from acquiring one of its biggest customers in the US.

    Credit Suisse analyst Rohan Gallagher said there were no deal breakers in terms of competition or regulatory authorities, but that Cemex's synergy guidance of $US130 million a year was conservative.

    "The $17-a-share cash bid is unlikely to satisfy existing shareholders," Mr Gallagher's report said. "We would be looking for a cash $19-$21-a-share successful bid."

    But Deutsche Bank analysts warned Rinker shareholders that Cemex did not have a history of increasing its first offer in any purchases. In the past 14 years, the Mexican giant has consummated 16 deals, including the 2004 purchase of RMC Group in Britain for $US5.8 billion.

    It was unlikely there would be a counter-bid from a European construction materials company, unless Rinker sought a white knight, the Deutsche report said.

    Mr San Agustin is expected to fly out for Cemex's headquarters in Monterrey, Mexico, as early as today after completing his two-day sales pitch.

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