APRIL 4, 2007 – United States Department of Justice

Antitrust Lawsuit Against CEMEX

Cemex S.A.B. de C.V., a Mexican concrete supplier, will be forced to sell its Florida and Arizona operations if it completes a hostile takeover of Rinker Group, an Australia-based company.

 

A Justice Department statement said that the proposed acquisition would substantially reduce competition for ready mix concrete in Southeast Florida, Tampa, St. Petersburg, Fort Walton Beach, Panama City, Pensacola, Jacksonville, Orlando, Fort Myers and Naples; as well as Flagstaff and Tucson. For large construction projects, Rinker and Cemex are the only two companies able to supply ready mix concrete in Flagstaff. Only one or two other companies are capable of handling large projects in the other cities.

 

As a result of the acquisition, concrete block prices in Tampa/St. Petersburg will increase. Concrete block sales are dominated by Cemex and Rinker in the Fort Myers/Naples area, where more than 60% of concrete blocks are sold.

 

Upon acquiring Rinker, Cemex would be required to sell its 39 ready mix concrete, concrete block, and aggregate production facilities.

In a hostile cash tender offer, Cemex announced its intent to acquire Rinker on Oct. 27 2006. Originally, the offer was going to expire on March 30 2007, but was extended till April 27 2006.

 

Upon acquisition of Rinker, Cemex will be required to sell ready mix concrete assets to a single buyer. The cemex group would have to sell all of Rinker’s concrete block assets in Tampa and St. Petersburg, Florida. Fort Myers and Naples would also be included in this sale. Those buyers would need approval from the department’s antitrust division.

 

In large construction projects, ready mix concrete is used for highways, bridges, and tunnels. Concrete blocks are used for residential and commercial buildings. In the production of ready-mix concrete, concrete blocks and asphalt, aggregate is crushed stone and gravel extracted from quarries, mines or gravel pits.

 

With operations in more than 50 countries, Cemex manufactures and distributes cement, ready-mixed concrete, aggregate, concrete blocks, concrete pipes, and other building materials. Cemex generated about $24.6 billion in sales in 2006. Cement and ready mix concrete are Cemex’s two largest products, and aggregates are its seventh largest product. The U.S. accounts for about 25 percent of Cemex’s revenue. Based in Houston, Cemex runs its U.S. operations through a wholly owned subsidiary, Cemex Inc.

 

With operations in both the U.S. and Australia, Rinker produces and distributes aggregates, ready-mix concrete, cement, concrete blocks, asphalt, pipes, and other building materials. For 2006, Rinker’s sales were about $4 billion. Rinker is the second largest manufacturer of ready-mix concrete in the United States and the fifth largest producer of aggregates. The U.S. generates roughly 80 percent of Rinker’s revenue. The company is based in West Palm Beach, Florida, and operates its U.S. business through Rinker Materials Corp.