China's largest cement maker Anhui Conch Cement Co Ltd said yesterday it has reached agreements with two foreign strategic investors to take stakes in the firm.

 

Morgan Stanley Asia Investment Ltd (MS Asia), a subsidiary of Morgan Stanley, will take a 10.51 percent stake and the World Bank Group's private-sector arm, the International Finance Corporation (IFC), will take 3.82 percent, according to a statement given to the Hong Kong Stock Exchange yesterday.

 

The statement did not say how much the two investors would pay for their stakes.

 

Anhui Conch Cement is publicly-listed with 15.9 percent of its shares trading on the Shanghai stock exchange, 34.5 percent on the Hong Kong Stock Exchange, and the other 49.6 percent held by Anhui Conch Holdings Co Ltd, a diversified holding company.

 

After the completion, Anhui Conch Holdings Co Ltd will hold 442.48 million shares of the company, which represents about 35.24 percent of the total issued share.

 

In October IFC issued a 650 million yuan (US$70 million) loan to Anhui Conch Cement, a top supplier of high-grade cement in eastern and southern China.

 

Industry analysts said the money was loaned to Anhui Conch Cement to help it become more energy efficient and to improve its financial structure.

 

Hong Liang, senior researcher at China Galaxy Securities Co Ltd, told China Daily the deal showed that it is not only foreign cement makers who are looking for opportunities in the industry.

 

Hong said cement industry centralization in China should be enhanced to increase enterprise scale, especially through merger and acquisitions, so as to heighten enterprises' market competitiveness.

 

Some large foreign cement enterprises, such as Holcim, Lafarge, Heidelberg Cement, have already taken part in mergers and acquisitions in China's cement industry.

 

Statistics show that by the end of 2006, cement capacity in China will amount to 1.37 billion tons

 

But because cement oversupply will continue, cement prices will still be low.

 

Headquartered in Wuhu City, Anhui Province, Anhui Conch Cement has operations in East China around the Yangtze River Delta, as well as in South China.

 

According to an official from Conch Cement, Conch Group is building a long-time development strategy to produce and sell over 100 million tons of cement, aiming for sales in excess of 30 billion yuan (US$3.7 billion) in 2006.

 

Conch Group also plans to build five 10-million-ton clinker production bases before 2015, part of its attempt to become a global top 3 cement company.

 

Shares of Anhui Conch Cement yesterday rose 3.24 percent to HK$9.55 (US$1.2) on the Hong Kong Stock Exchange.

 

(China Daily December 30, 2005)