Lafarge sells Beijing cement and concrete plants to BBMG

Byswb

Updated Wed, 26 Jan 2011 00:00:00 GMT

Shares of Chinese building material group BBMG Corp. ended 0.5% higher in Hong Kong trade on Thursday after the company said it had agreed to buy three Beijing-based concrete and cement-making facilities from French building materials company Lafarge SA for 507 million yuan ($74.3 million).

Citi said in a research note Thursday the acquisition would give BBMG a 90% share of Beijing’s high-grade cement market.

BBMG said it will snap up 65 percent of Beijing Xingfa Cement Co Ltd, 70 percent of Beijing Shunfa Lafarge Cement Co Ltd and 76.72 percent of Beijing Yicheng Lafarge Concrete Co Ltd. Shares in the three are all owned by Lafarge China Overseas Holding.

The three companies own two new dry-process cement plants and one concrete plant in Beijing.

The move is expected to consolidate BBMG’s market presence in Beijing and the surrounding areas. BBMG said it would increase its production capacity of cement and concrete by 1.5 million tons and 0.3 million cu m respectively.

Lafarge China Overseas Holding is a subsidiary of Lafarge Shui On Cement. Lafarge Shui On is a joint venture between Lafarge, the world’s largest cement producer and Hong Kong-listed Shui On Construction and Materials Ltd.

"Lafarge Shui On has been putting its strategic focus in Southwest China, since the chances of expanding its business in Beijing appear to be slim," said a Lafarge Shui On Cement spokesman. "Lafarge Shui On will not have similar businesses with BBMG in the region after the share transfer."

"BBMG is the top cement producer in Beijing. We believe the purchase will benefit the plants as well as the workers in the long run," the spokesman added.

"Cement is a regional product due to high transportation costs, so it's vital for a cement producer to ensure a leading role in a certain region. We purchase the shares to enhance our lead position in Beijing, Tianjin and Hebei province," said an official at BBMG, who declined to be named.

"We believe it's a win-win situation as Lafarge has chosen an influential company to take over its plants and workers."

China's cement output has ranked first in the world since 1985.

The nation produced 1.63 billion tons of cement in 2009, or 17.9 percent year-on-year growth.

Global cement demand is forecast to rise 4.1 percent per year to 3.5 billion tons in 2013, according to the latest report by US-based research company The Freedonia Group.