Rinker rejects Cemexs $11.7 bn bid

Nov 29 | Updated: Nov 30 2006, 09:40am hrs
Rinker Group Ltd, Australias biggest building materials maker, rejected a hostile $11.7 billion takeover bid by Mexicos Cemex SA, saying it may be as much as 36% too low.

Cemex can offer a lot more, chairman John Morschel said at a briefing in Sydney on Wednesday. The stock is worth up to $17.74, compared with Monterrey-based Cemexs $13-a-share bid, a report by Rinkers adviser Grant Samuel & Associates Pty said.

Cemex will become the worlds largest cement maker by acquiring Rinker, which gets 80% of earnings from the US. The Australian company is attractive because it concentrates on Florida, Arizona and Nevada, which the US census bureau forecasts will grow at three times the national rate over the next 25 years.

Cemex have never increased a bid price, but this might be their first time, said Atul Lele, who helps manage about $313 million at White Funds Management in Sydney, and wont accept the current offer for his Rinker shares. Lele said Cemex may have to offer more than $15 to succeed.

Shares of Sydney-based Rinker rose 47 cents to A$18.53 in Sydney, equivalent to $14.50 at todays exchange rate. The October 27 bid, which was made in US dollars, has triggered at 34% gain in the stock. Cemex spokesman Jorge Perez declined to comment on Rinkers statement on Wednesday.

Rival bidders may emerge now that Rinker has valued its shares, Lele said. Holcim Ltd, the worlds second-biggest cement maker, or Lafarge SA, the biggest maker of building materials, are potential buyers, analysts including Matthew McNee at Goldman Sachs JBWere Pty in Melbourne said.

Rinkers board has had very preliminary discussions with a lot of players in the industry, Morschel told reporters, without elaborating. The company may also consider restructuring its businesses, chief executive officer David Clarke said in a interview.

Were working on all fronts to see if theres something more attractive than letting us continue operating as we are currently, he said. Rinker, which was spun out of sugar and building materials group CSR Ltd in 2003, supplies concrete blocks, pipes and other building materials. It also sells gravel, cement and asphalt used in roads and bridges, which it said will help weather the housing slowdown.

Clarke declined to comment on specific options, such as taking over competitors including Vulcan Materials Co or Martin Marietta Materials Inc to deter Cemex. Grant Samuel said Rinker could comfortably take on $3.5 billion in additional debt to generate greater returns.