CEMEX's Acquisition Strategy - The Acquisition of Rinker Group
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Case Code : BSTR376
Case Length : 29 Pages
Period : 2005-2010
Pub Date : 2010
Teaching Note :Not Available
Organization : CEMEX S.A.B de C.V
Industry : Cement
Countries : Mexico, Australia
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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.
CEMEX had been facing problems like lower net sales and high debt since mid-2007 since its acquisition of Australia-based major cement company, the Rinker Group (Rinker).
As of early 2010, CEMEX was the largest cement company in the world in terms of production capacity. It was one of the companies based in an emerging nation like Mexico that had grown to become one of the top multinational companies in the global cement industry. Most of CEMEX's expansion in the domestic market as well as abroad came through acquisitions. Over the decades, it had developed strong expertise in successfully integrating acquired companies and reaping significant benefits.
The company also relied on technology to optimize its operational efficiency, which placed it among the most profitable cement companies in the world.
CEMEX, which was known for its post-merger integration skills, also managed its cash flows well and used the free cash flows to amortize and eventually pay off the debt it had incurred for an acquisition. However, in mid-2007, CEMEX completed its largest acquisition ever by paying US$ 14.2 billion for acquiring Rinker.
CEMEX financed the Rinker acquisition completely through a debt from a syndicate of banks. It estimated that Rinker's operations would result in strong cash flows and that, along with its own cash flows, it would be able to successfully service the huge debt burden...