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CEMEX: the Southdown offer

International Business Case Study
by

Juan Imperiale

on 6 December 2012

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Transcript of CEMEX: the Southdown offer

International Business Case Study CEMEX: The Southdown offer CEMEX: Conclusions Leading global producer and marketer of cement
2nd largest in the US and the 3rd largest in the world
Founded in 1906 in Monterrey
Present in over 50 countries with 54,000 employees prepared by:
BERARDI Giulia
CHKHARTISHVILI George
IACOMELLA Mattia
IMPERIALE CURATI Juan
MITCHELL Jesse
XU Yunyun CEMEX wants to reenter the US market

CEMEX exports to the US were 47% or total from Mexico

After buying out its partner in the US, CEMEX found to be in violation of anti-dumping laws

American market is attractive to CEMEX Southdown Cash flow The Issue Analysis Company structure Assets structure Liabilities structure Background Cement industry fragmented until thirty years ago

In the 1990s the market began to consolidate

Emergence of Holderbank, Lafarge, and CEMEX as market leaders Strategy Identified high-growth opportunities in developing economies

Committed to customer service and satisfaction

Use of technology to ensure efficient production and efficient distribution

Success of branding cement in Mexican market

Use of the peso crisis to buy out
Latin American competitors

Use of various energy searches One of the largest cement producers in the US

Heavily invested in technology

Consistent drop in share price

Should Cemex purchase Southdown? Tangible assets are 90% of the LTA and 69% total assets
Property and operational equipment is 65% of the TA.
ITA are representing 9% of the TA.
12% increase in tangible assets in 1999. Company is able to meet its both its short term and long term liabilities.
58% of the company s total debt is represented by shareholders equity.
For every borrowed dollar shareholders give 1,4 dollars. Long term borrowing are invested in the long-term assets. Shareholders decided to re-invest 42% more of their earnings than in 1998. Solvency, operational efficiency and efficiency of using assets and capital Inventory 44% of total ST assets and the accounts recievable are amounting 42% of total STA. Account recievable days of handling is equal to 42 days on average
Inventory days of handling is 64 days
Accounts payable days of handling is 37 days on average Solvency analysis: Gearing ratio =1,54 Quick ratio = 1,16 Current ratio = 2,083 Operational efficiency: Efficiency of using the assets and capital: Estimation of the Southdown market value 22% increase in net cash provided by operating activities
60% increase in spending on investing activities Cash and cash equivalents has decreased by 6,6 times (122 mln) Market capitalization:
39,987,000 shares issued in 1999 * 45$ per share = 1,799,415,000~ 1,8 bln.
Price proposed by CEMEX:
39,9 87,000 Shares were issued in 1999 * 65$ per share = 2,599,155,000 ~ 2,6 bln.
Enterprise value:
(Market capitalization + Total Debt) – Cash\Cash equivalents = 2,375,215,000 ~ 2,38 bln. CEMEX is ready and interested to pay a higher price because of
- possible savings
- anti dumping avoiding
- increase sales
- access to the US market CEMEX: Acquisition Plan 1. Cost saving
2. Avoid anti-dumping
3. Access to US market
4. Time
5. Maximizing the value of CEMEX’s assets
6. Eliminate a strong rival firm
7. Producers and distributor network improvement
Full transcript