Lafarge wants to remit Tk 950cr to buy Holcim shares - Share market analysis of dhaka stock exchange, Bangladesh

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09 August, 2017 11:01 AM Source: The Daily Star Bangladesh

Lafarge Surma Cement wants to remit $117 million (about Tk 950 crore) to the Netherlands to complete the process of buying its shares in Holcim Cement Bangladesh.

It has sought approval from the Bangladesh Bank to send the money to acquire 100 percent share of Holcim Bangladesh from Amsterdam-based Holderfin BV.

In December last year, Lafarge Surma signed a share purchase agreement with Holderfin to buy 88,244 shares at $1,325.88 or Tk 106,000 each.

The BB, however, said the share is overpriced and asked Lafarge Surma to submit documents related to share valuation of Holcim Cement.

Lafarge Surma Cement Ltd (LSCL) has changed its name to LafargeHolcim Bangladesh Ltd (LHBL) following the approval from the shareholders in January this year.

Lafarge Surma is a joint venture of LafargeHolcim, a world leader in building materials, and Cementos Molins, a Spanish cement company with strong global presence.

When asked about the overvaluation of Holcim shares, LHBL said the company signed the share purchase agreement with Holderfin to buy the shares of Holcim Cement Bangladesh for $117 million.

“Once we receive the approval from the Bangladesh Bank, we will provide relevant information to the shareholders, the Bangladesh Securities and Exchange Commission, the stock exchanges, and other relevant authorities,” the company told The Daily Star in an email reply.

According to the BB, when comparing values with other cement-makers, Heidelberg Cement Bangladesh is accepted as one of the best companies in the local market. Its share, with a face value of Tk 10, traded at Tk 450 on Sunday.

The central bank also compared the share value of Holcim with British American Tobacco Bangladesh Company (BATBC), whose share is considered the most expensive in the stockmarket. With a Tk 10 face value, the current market price of each share of BATBC is Tk 2,960.

When compared with the share prices of other companies in the cement industry, the stock price of Holcim of Tk 106,000 appears extremely overvalued, said a central banker.

From this perspective, the BB may not allow the company to remit the full amount ($117 million), he said.

In November last year, the board of Lafarge Surma announced that it was exploring the opportunity of combining the businesses of Holcim Bangladesh and Lafarge Surma. The board approved the acquisition a month later.

Upon completion of the transaction, Lafarge Surma will have a combination of production facilities, with the only clinker production facility in Bangladesh and four grinding plants across the country.

This will enable the company to optimise its network of production facility and create more cost-effective routes to the market. The company will also become a major player with a production capacity of 4.2 million tonnes a year, according to the company.

A listed company with Dhaka and Chittagong stock exchanges, there has been a huge fluctuation in share prices of Lafarge in the last two years.

It rose above Tk 120 in August 2015, but fell sharply after the company announced the merger in November last year. Yesterday each share traded at Tk 58, which was Tk 90 in December last year.

Lafarge Surma's net profit fell 37 percent to Tk 30.94 crore in January-March this year, down from Tk 49.38 crore in the same period a year ago, according to the company. Earnings per share declined to Tk 0.27 from Tk 0.43 during the same period.

Lafarge and Holcim, the two cement giants in the world, completed the merger at the global level in July 2015.

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