Industry Overview

Relevant signals of growth and recovery are shown in the segments of building materials sector which represent Italcementi and Heidelberg core businesses. Furthermore, continued tailwinds will bring benefits regarding revenue and cash flows in the last part of the year. The sharp fall in oil price and the weakness of Euro will have a positive impact on the cost base. Moreover, this positive moment for the market is reflected by M&A activities which will remain brisk as mega-deals between major companies will add to the pressure for consolidation. It has been a boiling summer made of crucial deals. It is worth registering the merger between Holcim and Lafarge (€27 billion), announced in April 2014, which created the worldwide leader in the building material sector and the CRH’s €6.5 billions acquisition of some LafargeHolcim assets. Last but not least, the German company HeidelbergCement agreed to buy Italcementi for a €1.67 bn.


Turning to the protagonists of the deal, HeidelbergCement was founded in 1874 at Heidelberg (Germany) by Johann Philipp Schifferdecker. With a group revenue of 12.6 bn in 2014 it is one of the world’s largest building materials company with 44,900 employees at around 2,300 locations. Its core activities include the production and distribution of cement and aggregates, the essential raw materials for the manufacture of concrete. Apart from the acquisition of Italcementi, Heidelberg has always based on mergers and acquisitions the secret of its growth.


The turning point probably occurred in 2007, when the British company Hanson was acquired in a transaction, worth $15.8 bn, which gave the company the opportunity to expand its presence in UK and USA and made Heidelberg the first world’s aggregates producer. To finance the acquisition it was forced to sell Maxit Group and its 35% share in Vicat Cement. In September 2009 a capital increase together with a selling of shares by Merckle family allowed higher trading volumes on stock exchanges and the entry of international owners.


Born in 1864 at Bergamo(Italy), Italcementi is currently the major Italian company operating in the building materials sector with almost 5,000 employees and a market share of almost 30% in Italy. It is has been listing on Milan Stock Exchange since 1927 and its growth through years has been mainly focused on Innovation and Internationalization. The first attempts to broaden its activity beyond Italian borders began in the 1980s. However, it was only with the acquisition of Ciment Français in April 1992 that Italcementi consolidated its process of globalization: revenue increased from 775 to 2600 million with a reduction from 97% to 27,5% in the proportion obtained in Italy. Having strengthened its presence in Eastern Europe, Thailand, Kazakhstan, China and Kuwait from 1990 to 2007, Italcementi is one of the three main producers in India, which represents the world’s third cement market.

Transaction drivers

The combination of Heidelberg with Italcementi will create the world leader in aggregates, the second largest producer of Cement and the global number three in ready mix concrete.

The acquisition of Italcementi is a unique opportunity for Heidelberg to boost growth. Italcementi owns a high-quality assets’ portfolio with a perfect geographical fit to the existing footprint of the Group. In particular, Italcementi has a strongly competitive position in several developed markets as Italy, France, United States and Canada. Also, the company owns emerging market positions with high growth potential in India, Egypt, Marocco and Thailand. The excellent geographical fit will strengthen all of Heidelberg’s geographic clusters. Moreover, Italcementi shares Heidelberg’s philosophy of operating with strong local brands.

Dr Bernd Scheifele, Chairman of the Board, commented: “There is no other major Group in the industry which offers a similar complementary fit to our own operations. Wee see significant potential for value creation with the realization of synergies and the implementation of our proven standards of operational and commercial excellence.”

The largest synergies are related to operational business, sales and general administration. The commercial area and purchasing will generate further synergies. Thus will lead to a minimal amount of synergies of €175 million per year by 2018, of which almost 30% should start to be generated since 2016. There will also be a combination of R&D capabilities of both groups. In particular, Italcementi has developed high-performance and technologically advanced materials for building models, used in the construction of the Italia pavillion at Expo 2015.


To reflect the positive impact of this transaction, HeidelbergCement is increasing its mid-term financial targets announced. The Group now aims to generate more than €20 bn in Group revenue (previously €17 bn) and an Operating EBITDA of more than €5 bn (previously €4 bn) by 2019. It projects cumulative free cash flow of approximately €10.9 bn for the period from 2015 to 2019.

Terms and structure

On the 28th of July 2015, HeidelbergCement AG agreed to buy the Pesenti family’s 45% stake in Italcementi Spa for €1.67 ($1.85) billion. The German cement maker will pay €10.60 per share to the Pesenti family, a premium price of 61% to Italcementi’s price before the deal’s announcement, and then will make a tender offer at the same per-share price for the rest 55% of Italcementi, which is publicly traded. The deal values Italcementi’s equity, at €3.71($4.11) bn, whereas the market cap is €2.3 bn. Moreover, considering the debt, the enterprise value of the Italian cement company is stated at €7 bn.

HeidelbergCement will pay a mix of cash and shares. Itamobiliare, Pesenti’s Investment vehicle, will gain between 4 and 5 percent stake in the German company, worthed around €700 million. Thus indicates the amount of cash will be around €1 bn. The deal will be partially financed by cash, on December 2014 HeidebelrgCement gained €1.26 bn by selling its Hanson building products North America and UK, and by a bridge financing of €4.4 bn provided by Deutsche Bank and Morgan Stanley. This will partially be repaid by non core asset sales to Italmobiliare for a total amount of €1 bn and by issuing bonds, operating cash flows and proceeds from the streaming portfolio. An example is proven by the selling of Italcementi’s 5% stake in West China Cement for €307 million.


The closing of the Purchase Agreement is subject to approval by the antitrust, particularly in Europe and in the USA, and is expected to take place during 2016. The deal represents HeidelbergCement’s biggest acquisition since 2009, when took over Hanson Plc, a Britain-based firm, for €12 bn.

Morgan Stanley and Deutsche Bank are advisors of HeidelbergCement while Mediobanca works for Italmobiliare.

To contact the authors:

Giuseppe Scavolo

Federico Mainardi