Despite all the evidence of Middle Eastern petrodollars flowing into real western assets, the process is not a one-way affair.
Lafarge of France demonstrated as much on Monday, with news that it is paying some €8.8bn in cash and shares for Orascom Cement – party of the sprawling mobile phones to hotels empire of Egyptian financier Nassef Sawiris.
The deal also carries €1.4bn of Orascom debt, with Lafarge issuing Mr Sawiris with stock worth 11.4 per cent (or €2.8bn at €125 a share) of the enlarged group and then funding the rest of the deal with €6bn of fresh borrowings.
Lafarge said the acquisition would yield synergies of €150m a year and would be earnings enhancing from year one. It claims this is a “major breakthrough” in the French company’s cement strategy, with production now set to reach 260m tons by 2010, by which time the contribution of emerging markets operations to Lafarge’s ebitda should have reached 65 per cent.
And, just to underline the confidence at Lafarge, the company has warned that profits next year will be better than expected:
“Excellent 2008″ targets will be exceeded and ambitious new financial targets set for the Group:
- Net earnings per share of more than €15 in 2010, vs €7.86 in 2006
- ROCE of more than 12 per cent in 2010, vs 9.4 per cent in 2006
- Free cash flow of more than €3.5bn in 2010, vs €1.4bn in 2006
As for Mr Sawiris, his family will bank a $11bn cash distribution, while he will remain as chief executive of the cement business and also join the main Lafarge board.
Orascom was advised by Citi on the sale. The Lafarge debt is being provided by BNP Paribas, Caylon and Morgan Stanley.