LafargeHolcim, the world’s biggest cement maker, on Thursday announced a $3.4 billion deal to buy Firestone Building Products from Japan’s Bridgestone Corporation in its biggest acquisition in more than a decade.
The purchase of the roofing products business is the biggest under CEO Jan Jenisch, who since taking over in 2017 has focussed on paying down debts, quitting less profitable markets and smaller bolt-on deals.
It will help LafargeHolcim tap increasing demand for roofs that generate solar energy and cool buildings, with cities such as San Francisco requiring solar panels on new buildings.
Jenisch said his company’s focus was now on growth, with plans to roll out Firestone Building Products beyond the United States where it currently generates nearly 90% of its $1.8 billion in annual sales.
“We said we wanted to have a fourth leg for our company – building solutions and products – for this we need a bigger acquisition,” Jenisch told reporters.
“We needed a platform which had technologies and an innovative product range to kick start this fourth segment and this is exactly what this Firestone business is offering to us.”
The Nashville, Tennessee-based business generated an operating profit of $238 million in 2020. Around half of the deal would be financed through LafargeHolcim’s exiting cash, with the rest financed via issuing bonds.
LafargeHolcim said it expects the deal to be earnings accretive from its first year, with mid-single-digit percentage organic sales growth.
Jenisch said there was scope for rapid growth in the $50 billion global market for flat roofs, which he expects to reach $65 billion by 2027, noting increasing demand for roofs that generate solar power and increasing urbanisation.
“We want to become the market leader in flat roofing systems. We are currently number four in this fragmented market,” Jenisch said.
“We will be significantly increasing the business, we have a lot of opportunities in the core market of the U.S. and then we will expand rapidly into Latin America and also accelerate our business in Europe.”
Among competitors are Jenisch’s previous company Sika, although he denied he was trying to copy the Swiss construction chemicals maker.
“Sika is also in the roofing market…in some markets, and in some technologies, they will compete with us,” he said. “But that is a good thing, it is always good to have a solid field of competitors and I think they are one of them.”
Analysts said the deal, although coming at a high price, would help LafargeHolcim expand its solutions and product business, which is less capital intensive than its cement operations.
The company’s shares were 1% higher in early trading.
“It is clearly a transformational step with significant synergies,” said Bernd Pomrehn, an analyst at Bank Vontobel.
Source: Reuters.com