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Breedon Ready With $1.6 Billion for Lafarge, Anglo Deal Fallout

Breedon Aggregates Ltd. (BREE), whose investors include George Soros, can spend 1 billion pounds ($1.6 billion) on assets that may come to the market as Lafarge SA (LG) and Anglo American Plc (AAL) pursue a tie-up in crushed rock.

The combination of Anglo’s Tarmac operation with Lafarge is expected to prompt 250 million pounds to 500 million pounds of assets to come onto the market when the Competition Commission rules on its impact, Peter Tom, chairman of the Breedon-on-the- Hill-based company, said by phone.

“We can comfortably spend up to 1 billion pounds on acquisitions,” said Tom, the former chief executive of Aggregate Industries, bought by Holcim Ltd. (HOLN) for $4.1 billion in 2005. “We do not expect assets of that size to come to market in the short term.”

The aggregates industry may see further consolidation as Lafarge and HeidelbergCement consider disposals as a means to regain investment-grade ratings. Bernard Fontana, Holcim’s newly appointed chief executive, is reviewing the company’s portfolio and said he was open to divestments.

The Commission on Feb 21. said the planned Lafarge and Anglo venture will reduce the number of U.K. cement makers to three from four and limit competition. It may prohibit the transaction in full or demand the sale of assets. The companies may have to divest cement and ready-mix concrete operations on a scale similar to the current operations of either company, the Commission said.

Deal Activity

Merger and acquisition activity in the building materials industry jumped 23 percent in 2011 to $27.9 billion, according to data collected by Bloomberg. That’s still just 38 percent of the $73.7 billion in deals announced in 2007. That year featured the industry’s two largest deals ever, HeidelbergCement’s $18- billion takeover of Hanson (HEI), and Lafarge buying Orascom’s construction business for $15 billion.

The transactions inflated debt just prior to a slump in U.S. and U.K housing markets, and lower economic growth due to the European debt crisis. Like Lafarge and HeidelbergCement, Cemex SAB, the largest cement maker in the Americas, was stripped of its investment-grade credit rating.

Lafarge CEO Bruno Lafont said he’s aiming to sell at least 1 billion euros of assets this year, and his counterpart Bernd Scheifele at HeidelbergCement in November said he was going to look “more closely at disposals.”

“There are not many buyers for these assets,” Breedon Chairman Tom said on the plants that Lafarge and Anglo may be required to sell. “We are a natural buyer, and we have the necessary firepower. We are in the fortunate position to be supported by our banks and our shareholders.”

To contact the reporter on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net.

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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