After sweetening its bid by more than 20%, Cemex appears much closer to consummating a Rinker Materials takeover. A revised offer announced April 9 equates to $79.25 per Rinker American depositary receipt (ADR), versus an initial $65/ADR offer from late October. (New York Stock Exchange-traded ADRs represent five Rinker Group Australian Stock Exchange-traded shares.)

The deal would afford Cemex a U.S. franchise with annual sales upward of $8 billion. The company would have an integrated ready mixed, block, aggregate and cement platform with more than 700 sites spanning the Carolinas, Sunbelt, and Pacific Northwest, plus a 49-plant, coast-to-coast concrete pipe and precast business.

Dubbed by Cemex as “best and final,” the offer runs through May 18 and includes a host of conditions that favor Rinker shareholders by waiving certain terms of the original takeover bid. Rinker's board recommended that shareholders accept revised overture “in the absence of a superior proposal.” Directors had held firm on a recommendation that shareholders reject the $65/ADR level bid, a position supported by post-October trading activity that valued the ADR in the $70-$77 range. Cemex's revised bid is slightly less than Rinker ADR's all-time high, $83, set in May 2006. Nevertheless, it is nearly 350% higher than the split-adjusted $23/ADR with which Rinker opened trading on the New York Stock Exchange in October 2003.

FEDS PEG 39 PLANTS FOR CEMEX TO UNLOAD PENDING RINKER SUCCESS

In the event of a Rinker Group takeover by Cemex S.A.B. de C.V., the Justice Department Antitrust Division would require the suitor to divest ready mixed, concrete block and aggregate operations in the Florida markets of Fort Walton Beach/Panama City/Pensacola, Jacksonville, Orlando, Tampa/St. Petersburg, and Fort Myers/Naples, plus Flagstaff and Tucson, Ariz. The Justice Department announced its position on a prospective Rinker Materials Corp.-Cemex USA combination last week after months of reviewing market impact of what would be the largest merger to date in heavy building materials.

Rinker Materials' ready mixed, block and aggregate portfolio includes 290-plus sites. The sale of 39 properties to Justice-approved buyers would fulfill terms of a consent decree the government outlined last week, and resolve a concurrent civil antitrust lawsuit filed in U.S. District Court in Washington, D.C., to block the proposed transaction. Justice contends that without the divestitures, the proposed deal would lessen competition in certain Arizona and Florida metropolitan areas, resulting in increased prices for ready mixed, concrete block, and aggregate sold to customers handling state Department of Transportation and large building projects. Cemex addressed similar circumstances two years ago, when U.S. regulators' approval of its plan to combine its U.S. business with RMC USA Inc. hinged on disposal of ready mixed plants in Tucson. Those properties wound up with California Portland.

CEMEX BREAKS GROUND ON $250 MILLION BALCONES EXPANSION

Cemex USA President Gilberto Perez and Texas Governor Rick Perry broke groun in late March at a celebration signaling the official beginning of the company's Balcones operation expansion in New Braunfels, Texas. Estimated at $250 million, the project will add a second kiln to the operations, doubling the annual cement production capacity to 2.4 million tons to support the growing need for cement in Texas.

Even though the cement production will double, the operations' emissions will not increase. Cemex will replace existing equipment and install state-of-the-art technology to protect the environment. More efficient dust control equipment and the installation of new NOx-control technology to the existing kiln system will be completed. Additionally, a new finish mill with an energy efficient vertical roller mill — one of only a few in the United States — will be built. All of these items will allow the plant, when the new expansion is fully completed in 2008, to remain at current emissions levels and at the cutting edge of technology in the industry.

Currently, at the Balcones cement and quarry operations, Cemex employs nearly 180.

BILLION DOLLAR DEALS

Hanson-Pioneer	2000	$2.5 billion
Cemex-Southdown	2000	$2.8 billion
Dyckerhoff-Lone Star*	2000	$1.2 billion
Lafarge Group-Blue Circle	2001	$3.6 billion
Cemex-RMC Group	2005	$5.8 billion
Holcim-Aggregate Ind.	2005	$3.3 billion
CRH-APAC*	2006	$1.3 billion
Lafarge Group-Lafarge NA	2006	$3.0 billion
Vulcan-Florida Rock**	2007	$4.6 billion
Cemex-Rinker Group**	2007	$12.8 billion
* Limited ready mixed assets **Proposed

CEMENT TOTALS

Total shipments of portland and blended cement in the United States and Puerto Rico were about 7.9 million mt in December 2006, according to the U.S. Geological Survey. This was about 6.4% lower compared with shipments for December 2005. Year-end shipments totalled about 124.3 million mt, slightly lower (0.3%) than for 2005.

Clinker production totaled 7.8 million mt in December 2006, a 2.1% decrease compared with 2005. Year-end clinker production was about 89.9 million mt, up 1.3% over all of 2005.

Masonry cement shipments were 340,000 mt in December 2006, a 14.2% decrease compared with shipments in December 2005. Total shipments for the year were about 5.44 million mt, down slightly (0.94%) from shipments in 2005.

DECEMBER 2006