Asia Cement (China) Holdings Corp (亞洲水泥中國控股), the Chinese unit of Taiwan’s second-biggest cement maker, yesterday said it has reached a share purchase deal with Sichuan Lanfeng Cement Co (四川蘭豐水泥), two days after the company issued a positive profit alert for the previous quarter.
In separate filings with the Hong Kong Stock Exchange, Asia Cement (China) said it had acquired 100 percent of the equity interest in Sichuan Lanfeng for 2.005 billion yuan (US$322.25 million) through its wholly owned subsidiary Sichuan Yadong Cement Co (四川亞東水泥).
“Upon the completion of the acquisition, Sichuan Lanfeng will become a wholly owned subsidiary of Sichuan Yadong,” Asia Cement (China) said in the filing.
The proposed acquisition, which was first revealed by Asia Cement (China) on April 3, is still pending approval from authorities.
The company expects to close the deal by May 31, the filings showed.
Sichuan Lanfeng Cement operates two new dry process production lines, with a total output of 5 million tonnes a year, in Pengzhou City in Sichuan Province.
Credit Suisse AG said the deal would allow Asia Cement (China) to become the largest cement producer in Chengdu with an annual capacity of 11 million tonnes, or a market share of up to 45 percent, from 6 million tonnes.
The company’s overall annual production in China is to rise to 35 million tonnes following the latest transaction.
“We view Asia Cement China’s planned acquisition of Sichuan Lanfeng Cement as a positive move to enhance its market position in Chengdu,” Credit Suisse AG’s Taipei-based equity strategist Jeremy Chen (陳建名) said in a client note.
“The acquisition will bring Asia Cement (China) a step closer to its capacity target of 50 million tonnes per year by 2015,” Chen said.
Asia Cement Corp (亞洲水泥) has an annual capacity of 5.5 million tonnes in its Taiwan operation and a combined 30 million tonnes capacity from its operations in Jiangxi, Hubei and Sichuan provinces in China.
Analysts said that the company has become more aggressive in its China business over the past two years as it aims to take advantage of rising cement demand from China amid Beijing’s urbanization push.
In early January, Asia Cement and the Chinese subsidiary signed a strategic partnership agreement with Anhui Conch Cement Group (安徽海螺水泥股份) and China Conch Venture Holdings Ltd (中國海螺創投) to develop environmentally friendly production methods and lower production costs, while working together to penetrate new cement markets around the world.
On Monday, the Hong Kong-listed Asia Cement (China) said in a filing to Hong Kong Stock Exchange that its first-quarter net profit would be more than 1,300 percent higher than the 8.5 million yuan a year earlier, attributing the earnings surge to an increase in average selling price and a decline in coal costs during the period.
Asia Cement (China) is scheduled to release its financial results for the first quarter by the end of this month.
Hua Nan Securities Investment Management Co (華南投顧) analyst Henry Miao (苗台生) said the latest acquisition showed that Asia Cement is gearing up to buy assets in the Chinese market.
“I expect Asia Cement to announce more deals,” Miao said.
Asia Cement could report about NT$2.5 in earnings per share for this year on a consolidated basis, up from NT$2.12 posted a year earlier after taking the profit alert of Asia Cement (China) into account, he said.