MEXICO: Slim’s Elementia Said in Talks to Buy Out Lafarge

Elementia SA, the Mexican cement maker backed by billionaires Carlos Slim and Antonio del Valle, is in talks to buy out partner Lafarge (LG) SA in their joint venture, people with knowledge of the matter said.

Elementia has the right to buy Lafarge’s 47 percent stake under an option described in the original terms of the Mexico partnership, said two of the people, who asked not to be identified discussing private negotiations. Lafarge wants to avoid competing with itself in Mexico after agreeing in April to a $40 billion merger with Holcim Ltd., which already operates in the Latin American nation, two people said.

While the stake could be valued at as much as $500 million, it wouldn’t fetch that high a price because Lafarge has limited bargaining power, one of the people said. There is no guarantee that a deal will get done, and Elementia may explore other options, the person said.

Elementia may opt to invest in its existing business or make a different acquisition because it already has majority and management control of the venture, said the person. Lafarge may be forced to offer its stake at a discount to convince the Mexican company to buy, the person said.

Lafarge shares rose as much as 0.4 percent and were up 0.1 percent at 63.76 euros at 10:12 a.m. in Paris. The stock has gained about 17 percent this year.

“It’s not going to be very often when Elementia is offered this sort of deal,” Ian Osburn, a London-based analyst at Cantor Fitzgerald LP, said in a telephone interview. “Lafarge will argue these are high quality, well-looked-after plants.”

Elementia IPO

Mexico City-based Elementia is working with Citigroup Inc. for a potential initial public offering that could produce a cash windfall, two people said. Elementia sells cement in Mexico under the brand Cementos Fortaleza.

A spokesman for Elementia didn’t respond to a message seeking comment, while a spokesman for Citigroup declined to comment. A spokeswoman for Paris-based Lafarge wasn’t immediately able to comment. Representatives for Slim and Del Valle didn’t respond to requests for comment.

Buying out Lafarge would bolster Elementia’s position in Mexico, where President Enrique Pena Nieto’s development plan is likely to prove positive for cement makers as infrastructure spending rises, Credit Suisse Group AG analysts led by Vanessa Quiroga wrote in a July 11 research note. The Mexican government has said that economic overhauls approved last year will lure investment and boost growth.

Cemex is the top cement maker in Mexico, with the capacity to produce 29.3 million metric tons per year, followed by Holcim, which can produce 12.2 million metric tons annually. The joint venture of Lafarge and Elementia produces about 2 million metric tons.

LafargeHolcim didn’t include the Mexican joint venture on a list published last week of assets slated for possible sales.