Gypsum industry news

Europe/South America: The Belgian building-material company Etex Group has received approval from the European Commission (EC) to buy the European and South American gypsum activities of French cement group Lafarge for over Euro1bn (USD1.4bn). The EC ruled that the transaction would not significantly impede effective competition.

The activities, which generated Euro895m in revenue for Lafarge in 2010, will be incorporated into a new entity, in which Lafarge will hold a 20% stake. The divestment is in line with Lafarge's strategy to reduce its debt by Euro2bn in 2011.

World: In the first major gypsum deal since the onset of the recession on 14 July 2011 Lafarge announced that is would sell its gypsum interests in Europe and South America to the Belgian Etex Group, its current joint-venture partner in South America.

Under the proposed agreement, Lafarge would receive net cash proceeds of approximately Euro850m and in addition would receive a 20% interest in the new partnership. The partnership would combine the European and South American Gypsum activities of both groups.

Lafarge's European and South American Gypsum division manufactures gypsum wallboard and other gypsum-based products such as plaster, joint compounds and plaster blocks. In 2010 the European and South American operations generated combined sales of Euro895m and their combined earnings before interest, tax, depreciation and amortisation were Euro115m. The group's other gypsum interests, including its joint-ventures in Asia with Boral, represent sales of around Euro500m/yr.

The deal will have to receive the approval of the relevant anti-trust authorities and the group will also conduct an information and consultation process with the relevant employee representative bodies.

Above: Summary of Lafarge wallboard assets 2010. The Global Gypsum Directory 2010 lists 45 Lafarge wallboard plants across 30 countries, with a total capacity of approximately 1.3BnM²/yr in 2009-10. Nearly 8000 people are directly employed by the unit. Key: Number of plants (Capacity in MM²/yr).

In a conference call, Bruno Lafont, Chairman and CEO of Lafarge said that Lafarge's gypsum interests represented a modest 9% of its sales in 2010 and that the sale was consistent with Lafarge's plan to focus on its core activities, which he listed as cement, concrete and aggregates. He highlighed the group's focus on providing building materials to rapidly-growing, developing markets with fast population growth rates and a need for new housing and infrastructure development.

He stressed that Lafarge would keep a 20% in the new joint-venture, which he expected to contribute positively to the group's balance sheet and was in line with the best interests of its shareholders.

Lafont summarised the assets in the deal, stating that all of the European interests held by Lafarge in France, the UK, Germany, Italy, Poland, Romania and the Netherlands represented around 60 industrial sites and that the move would affect approximately 3300 employees. In Lafarge's native France, the move affects four wallboard plants, seven associated plants that make jointing compounds and metal studs, five gypsum quarries and a total of 1400 employees.

In South America, the move affects four countries, namely Brazil, Argentina, Chile and Colombia. In these countries, Lafarge and Etex have been engaged in a joint-venture project dating back several years.

Lafont added that despite it being a small component of its operations, Lafarge currently has gypsum interests on all continents and will, for the meantime, be keeping hold of those in Asia, Australasia, Africa and North America. He said that keeping a 20% stake in its existing interests in the affected areas would allow it to, "benefit from the upturn when it comes." He said that it was appropriate for the group to 'keep a link' to gypsum, adding that Lafarge has the right to sell its 20% interest after five years.

He also said that the transaction would help Lafarge improve its relationship with existing partner Etex and allow both groups to expand the positive relationship that has been developed in South America throughout their newly-combined European operations. Lafont commented that the two groups shared the same values and a similar management style.

Speaking personally, he said that he was pleased to announce the deal and concluded that it was a positive move for Lafarge through maintaining its 20% stake, Etex and the shareholders of both groups.

In a statement issued by Lafarge before the conference call Lafont said, " This project unlocks immediate value for the Group while allowing Lafarge to participate in the new entity's future success. We are very pleased with the future prospects of this reinforced partnership with Etex Group, a strong industrial company with expertise in building materials and systems. This operation is positive for Lafarge and its shareholders and will contribute to the strengthening of the group's balance sheet and to the optimisation of its portfolio."

France: Lafarge has chosen a handful of bids, including those of investment funds Cinven and Bain Capital, for its plaster unit Lafarge Gypsum, from at least 10 different offers. Belgian building material group Etex is also reportedly still in the race, while Advent, Carlyle and TPG have been ruled out.

Other offers were reportedly made by Kohlberg Kravis Roberts & Co. Eagle Materials Inc., USG Corp and Saudi Arabia's National Gypsum Company. The bids are around Euro900m on average.

Lafarge Gypsum's operating profit jumped 80% on the year in the first quarter to Euro18m, while its sales rose by 9% to Euro375m. The US activity, however, struggled with a loss in 2010. It is not known whether or not the assets will be split up geographically, as had previously been suggested.