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Mexican cement giant Cemex may be waiting for a sharper downturn of the US housing market before turning up the heat on Australian building materials company Rinker to accept its US$12 billion ($17.6 billion) takeover.
The hostile offer, which Rinker rejected last week, could hang for months as Cemex bides its time for the US housing slump to hit bottom and hurt Rinker's results and stock price again, analysts say.
The United States accounts for about 80 per cent of Rinker's business and the weak housing market was weighing heavily on Rinker shares before Cemex made its October 27 bid.
If the downturn deepened or became prolonged, it could hit Rinker's stock again.
"That seems to be the strategy," said Scotiabank analyst Marco Reyes, referring to Cemex's possible wait-and-see plan for the US market, which is also Cemex's top revenue earner.
Analysts say Cemex, which on Monday refused to increase its bid, is not in a rush because no rival offers for Rinker have emerged. Global cement peers Lafarge of France and Swiss-based Holcim Ltd are tied up and integrating other recent acquisitions.
Cemex said its US$13 a share offer for Rinker was "full and fair" and that an independent valuation commissioned by Rinker was too high. That put its value at between A$20.58 and A$23.04, or about 25 per cent to 40 per cent higher.
Cemex has set a December 27 deadline for its offer, although that date could be extended. It has called a shareholders' meeting for Thursday to discuss the Rinker offer.
Analysts see the Mexican company persisting with its attempt to buy Rinker, given it went public with its plans and that it has the debt financing ready to complete the all-cash transaction.
"The cash is there, so why back out?" said Reyes.
However, the takeover bid could fall apart because of the wide differences on Rinker's value, Ixe brokerage said in a recent note.
"In our opinion, there is a high possibility that the deal will fail," Ixe said.
Cemex, which has made 16 significant acquisitions in the last two decades to become the world's No. 3 cement maker and the global leader in ready-mix concrete, is in unknown territory with its unsolicited bid for Rinker.
Cemex normally clinches price deals with the boards and managements of target companies before launching official acquisition bids, so it is unusual to be in a position where markets speculate whether it will sweeten or not.
Analysts believe Cemex might raise its offer, but only a tad, partly because the company is shackled by a commitment to shareholders to always hit a 10 per cent return on capital.
"I do not rule out that Cemex might raise its bid a little, it has the financial power to do so. But it would not be much," said one Mexican analyst, asking to remain anonymous.
- REUTERS
