July 27, 2015

Aboitiz Equity Ventures Inc (AEV) formalizes agreement with CRH

Aboitiz Equity Ventures Inc (AEV) announced yesterday that it has formalized its investment agreements with CRH plc (CRH) to acquire the Philippines assets and businesses of Lafarge SA, including the cement production and other cement related businesses and services.

To recall, AEV signed last May an Exclusivity Agreement with a non-binding Memorandum of Understanding (MoU) with CRH to potentially invest with CRH in the acquisition of the majority of the shares of Lafarge Republic Inc (LRI) and the shares in Luzon Continental Land Corporation and Lafarge Cement Services Philippines Inc, which together constitute the majority of Lafarge's Philippine cement operations (18 May, Daily Wealth Take).

The agreement will be by way of an agreed investment in holding companies. Headquartered in Ireland, CRH is a global leader in the manufacture and supply of a diverse range of building materials and products with operations in 34 countries. According to AEV, full implementation and completion of the transaction is expected to be completed within 2H2015, subject to the conditions under the merger of Holcim and Lafarge and the approval of the global sale of Lafarge assets.

Our take: The estimated total investment of AEV is approximately P24b. We believe the acquisition will be funded via the P25b fixed-rate retail bonds announced by AEV last March. The bonds will be issued in one or more tranches, depending on market conditions. The bonds will be offered to the public in 2H15. As of end-Mar, AEV’s parent debt stood at P9.2b while net debt amounted to P5.5b. Consolidated net-debt-to-equity was at 0.47x. – WealthSec