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Mexican cement titan to buy SouthdownBy SAUNDRA AMRHEIN © St. Petersburg Times, published October 3, 2000 As foreign companies continue to gobble up the American cement industry, Southdown Inc. looks like the latest meal. Southdown Inc., one of the country's largest cement producers with a cement plant and rock mine north of Brooksville, announced Friday it has agreed to sell its operations to one of the world's largest cement producers, CEMEX of Monterrey, Mexico, for $2.8-billion. The sale includes $185-million in long-term debt. Friday's agreement, approved by the boards of both companies, calls for CEMEX to acquire Southdown for $73 per share, a 30 percent increase on Southdown's closing price per share on Thursday. The agreement also comes four months after the announcement that Florida Crushed Stone intends to sell its operations to CSR America, whose corporate offices are in Australia. Like Southdown, Florida Crushed Stone has mining and cement plant operations north of Brooksville. Southdown, located off U.S. 98 north of Brooksville, bought the cement plant and mining operations in 1988 from Moore McCormack Resources Inc., which bought it from Florida Mining & Materials in the late 1970s. Local and corporate officials with Houston-based Southdown would not comment on the potential impact on the 130 Southdown employees in Hernando County or the rest of the company if the sale is approved by federal officials. "I've been through this twice already," said Brooksville's plant manager Don Kelly, who has been at the site for 25 years. "I don't think it will have any impact at this time, but I don't know," he added. Aside from the two-kiln cement plant, Southdown mines soft rock for its cement plant on the 4,000-acre site. Vulcan/ICA mines hard rock used for concrete on about half of Southdown's property, but Kelly did not know whether that relationship would change with the impending sale, which he learned about on Friday. Southdown corporate officials said they had informed their shareholders in March that they were looking for ways to increase the company's value while joining the global economy. "Really we have been in the process of evaluating how we could bring the best value to our shareholders by positioning the company for the longer term in the consolidating global market place," said Thomas Daman, vice president and treasurer of Southdown. "That's the key issue, getting that geographical diversification which brings stability," he added. "This is a cyclical business. You don't want to be dependent on any one market." Southdown, the second-largest cement producer in the United States, with a capacity to make between 10-million and 12-million tons of cement a year, currently has a network of 12 cement plants and 45 cement distribution sites serving 27 states nationwide. The company also mines, processes and sells construction rock aggregates and specialty mineral products in the eastern half of the United States and in California. It also distributes ready-mix concrete in California and Florida. CEMEX is the third largest company in cement-making capacity in the world, said John Bermudez, vice president of global strategy and research for Merrill Lynch in New York and a cement-industry analyst. CEMEX has cement plants throughout the world, including one in Texas, as well as ready-mix concrete, and rock aggregate production and distribution sites on four continents. After buying Southdown, CEMEX will have annual sales exceeding $6.3-billion, the company said. Bermudez said from his vantage point, the sale price seemed fair, though he thinks a case could have been made for a higher price for a company as strong as Southdown. The move is a good one for CEMEX, he said, because Mexican cement companies face tariff barriers on cement coming from Mexico to the United States, though CEMEX could import cement from its Asian or Latin American plants. By producing cement here, CEMEX will tap into the country's appetite for the product, a hunger increasingly fed by foreign companies. "The North American (cement) market is the second largest market in the world next to China," Bermudez said. "The consumption level has continued to outstrip supply levels. . . . If you want to take advantage of a great market, you want to be here now." Because of the size of Southdown, its sale means the amount of cement produced in the United States by foreign-owned companies will climb from 70 percent to 80 percent, said William Toal, chief economist at the Portland Cement Association, a trade group based in Skokie, Ill. "It will make a big difference," Toal said.
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