Holcim's Acquisitions in 2005

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Case Details:

Case Code : BSTR168
Case Length : 12 Pages
Period : 1999-05
Organization : MG Rover
Pub Date : 2005
Teaching Note : Available
Countries : Global
Industry : Mobile Phone

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Holcim's strategy in recent years has also changed in the areas of aggregates mining and the production of ready mix concrete. In the face of globalization and increased competition, the importance of having your own sources of aggregates and freshly produced concrete has dramatically increased.¹

- Radovan Voda, Regional Manager, Aggregates and Ready Mix Division, Holcim.

This strategic alliance (between ACC and Holcim) is a landmark in the Indian cement industry as it will bring significant advantages to the shareholders of both the partners and their commitments to the growth of cement markets in India².

- Paul Hugentobler, Whole-Time Director & Executive Committee Member, Holcim.

What we've observed is that over time, when markets get more and more mature, some other products, activities and segments are creating value - namely aggregates, ready-mix, and maybe even asphalt, paving, concrete blocks etc. In India, it's clearly emerging, so there is a focus on cement. In the case of Aggregate Industries, which is active in the UK and the US, it's clearly a mature market, so we follow the aggregate line.³

- Benoit-H. Koch, Executive Committee Member, Holcim.

Introduction

In 2005, the Glaris, Switzerland-based Holcim Group (Holcim), was one of the world's leading suppliers of cement, aggregates⁴ and ready-mix concrete. It held majority and minority stakes in a number of companies in more than 70 countries.

Holcim was also involved in consulting and trading services related to engineering. In 2004, the company had sales of CHF 13,215 million⁵ and a net income of CHF 914 million⁶ (Refer Exhibit I). Holcim adopted the inorganic growth strategy and was on an acquisition spree in the 1990s and 2000s. In 2005, Holcim acquired Aggregate Industries (AI) based in Leicestershire, UK and Associated Cement Companies Ltd (ACC) in India.

Holcim's acquisition strategy was based on the level of maturity of the market where the acquired companies were located (Refer Exhibit II).

AI, which was a supplier of aggregates, asphalt and ready-mix concrete, added value to Holcim's operations through integration in mature markets like the US and UK, while ACC was meant to bring in sustained revenues to Holcim due to the potential of the cement industry in an emerging economy like India, where demand for cement was increasing at a higher pace than in Europe and the United States (Refer Exhibit III).

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1] "The Holcim concern in regards to mergers and acquisitions,"www.holcim.com, August 26, 2003.

2] "A primer on Holcim,"The Hindu Business Line, January 23, 2005.

3] "Holcim report whets shareholder appetite,"www.aggregateresearch.com, March 03, 2005.

4] Gravel, Stone and Sand.

5] Approx US$ 10,657 million.

6] Approx US$ 737 million.