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Saint-Gobain Eyes $5.4 Billion in Deal in Expansion Push

Nov. 27 (Bloomberg) -- Cie. de Saint-Gobain SA is seeking 4 billion euros ($5.4 billion) in acquisitions as Europe’s biggest supplier of building materials tries to expand into higher-margin businesses and new emerging markets.

The company aims to have two-thirds of its so-called innovative materials and construction products in markets outside western Europe, Saint-Gobain said today in a statement, referring to its goals for the 2013-2018 period. To avoid a cut of its credit rating, the French company also seeks additional cost savings of 800 million euros by 2015.

Saint-Gobain Chief Executive Officer Pierre-Andre de Chalendar has been cutting costs and selling businesses to adjust to the European car and construction slump that has hurt demand for flat glass and building materials and put the company’s credit rating under pressure. Moody’s Investors Service and Standard & Poor’s, which rate Saint-Gobain at Baa2 and BBB respectively, have said they may downgrade the company.

“There are some geographies which are difficult and some where we need to invest,” de Chalendar said in Paris today. “We have been through a huge crisis, by far the biggest since World War II,” and volumes of products sold are still down 17 percent from 2007.

The company will make acquisitions to quicken expansion in North America and emerging countries, and to a lesser extent accelerate the development of high-performance materials, and strengthen building distribution’s core positions, the CEO said.

U.S. Scale

The group’s building distribution in the U.S. doesn’t have the “critical size,” so it’s a “strategic question mark,” said Benoit Bazin, Saint-Gobain’s head of the building distribution division. The company will focus on its leading positions in Europe and in Brazil, he said.

Saint-Gobain plans more than 3 billion euros in growth capital expenditure outside Western Europe by 2018, including 1.3 billion euros in North America to benefit from the recovery in construction and renovation, the company said. It will also continue to reduce costs at its glass business in Europe.

De Chalendar said this month he aims to complete the $1.7 billion sale of the North American assets of its glass bottle-and-jar unit Verallia to Ardagh Group SA by early 2014. Saint-Gobain, based in Courbevoie near Paris, may later sell the rest of division on the stock market, he added.

The CEO this year abandoned 2015 targets set in 2010 for annual sales excluding glass packaging of 55 billion euros, an operating margin of 5.5 billion euros, and a recurring net income of 3 billion euros.

To contact the reporter on this story: Francois de Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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