Lafarge-Shui on Secures 80% of Shuangma Cement

The board of Sichuan Shuangma Cement has approved the acquisition of a 50% equity stake in Dujiangyan Cement. Shuangma will pay for the stake through the issuance of Rmb2.8 billion ($410 million) worth of new shares to Lafarge China Offshore Holding Company, which is the controlling shareholder of both the seller and the buyer.
 

The deal will be subject to approval of Shuangma's shareholders at an interim shareholders' meeting to be held later this month, as well as approval from China Securities Regulatory Commission (CSRC) and the Ministry of Finance and Commerce.
 

Lafarge China is a wholly-owned subsidiary of Lafarge-Shui On Ltd, which is a joint venture between French cement giant Lafarge SA (which owns 55%) and Hong Kong-listed Shui On Construction and Materials. Before this transaction, Lafarge China owned 57% of Shenzhen-listed Shuangma and 75% of Dujiangyan Cement. The other 25% of Dujiangyan Cement was owned by Dujiangyan Construction Materials. The deal is the first instance of a foreign investor increasing its stake in an A-share listed company through a restructuring.
 

Lafarge China acquired its controlling interest in Shuangma in 2007. The injection of a 50% equity stake of Dujiangyan Cement into Shuangma is expected to take place before July this year, and fits into Lafarge China's plan to boost Shuangma's ailing business and market position through new technology. Once the new shares have been transferred, Lafarge China will own approximately 80% of Shuangma.
 

Dujiangyan Cement is a major cement producer in Sichuan, with an annual production capacity of 3.2 million tonnes. Construction is a significant growth industry in the southwestern Chinese province. Sichuan lies at the centre of China's "Go West" policy, a plan to correct imbalances in the country's economic development by placing more of a focus on inland provinces that have experienced growth at a slower rate than those on the coast. Furthermore, Sichuan was at the very centre of the devastating earthquake in May last year and the substantial reconstruction needed since then has meant that demand for construction materials far exceeds the supply.