Consunji’s acquisition of cement biz fails to bolster investor confidence
News of Consunji-led companies acquiring cement manufacturer Cemex Holdings Philippines Inc. (CHP) drew negative sentiments from the market on Friday, with the latter’s shares plunging by nearly 30 percent.
This came a day after the Consunji group announced it was buying all 42.14 million shares held by Cemex Asia BV in Cemex Asian South East Corp. (Casec) for $305.6 million. Casec owns 89.97 percent of CHP, the country’s fourth largest cement manufacturer.
In a stock exchange filing on Friday, DMCI Holdings Inc. said the deal valued CHP at $340.1 million, or P19.5 billion, pricing the latter’s shares at P1.42 each. This is way below CHP’s initial public offering (IPO) price of P10.75 per share back in 2016.
This resulted in the drop in CHP’s share price, according to Alfred Benjamin Garcia, research head at AP Securities Inc. By the end of the session, CHP’s share price fell by 28.42 percent to P1.36 each.
DMCI’s shares likewise dipped by 0.73 percent to P10.86 each, implying that the market “is not too keen on DMCI’s acquisition of a not-so-profitable business,” he told the Inquirer in a Viber message.
CHP’s equity value is also lower by 23.8 percent than its current market capitalization of P25.6 billion.
With the Philippine cement manufacturing industry still suffering from low margins due to high costs, Garcia said nearly all cement companies have been posting losses since 2022.
These include CHP, which doubled its losses last year to P2 billion.
“At this point, only time will tell if the vertical integration with DMCI’s business units will improve CHP’s finances,” Garcia told the Inquirer in a Viber message.
Asked whether the shares were reasonably priced, he said: “It’s fairly priced given the state of CHP’s finances and the divestment of its quarrying interests, but definitely not good for investors who hoped for a higher price.”
Among Cemex Asia BV’s assets that will be sold to the Consunji companies are its 40-percent equity interest each in APO Land & Quarry Corp. and Island Quarry and Aggregates Corp.
Garcia noted, however, that CHP “fits quite well into the Consunji-verse” and that it would “synergize well” with the other operating units of DMCI, including DMCI Homes and Semirara.
Cement is a key material used in infrastructure development, which can potentially supply DMCI Homes and its engineering, procurement and construction business.
Coal coming from Semirara, meanwhile, can help supply heat energy needed for cement production.
While CHP remains in the red, Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., said buyers “have what it takes to turn things around at an industrial company like CHP, and make its deal pay off in the long run.”
