Taiwan Cement Corp (TCC, 台灣水泥) yesterday said that its board of directors has greenlit a US$1.1 billion investment in Turkey’s OYAK Cimento AS to expand the company’s presence beyond Asia as the Chinese market becomes increasingly saturated.
The Turkish firm is fully owned by Ordu Yardimlasma Kurumu (OYAK), the pension fund of the Turkish Armed Forces.
TCC said it would begin negotiating the terms of a joint venture holding company with OYAK, which would control the Turkish company’s domestic cement businesses.
The joint venture, tentatively named Dutch TCC Holdings, would be 40 percent owned by TCC, with OYAK controlling 60 percent, TCC said in a filing with the Taiwan Stock Exchange.
That would enable the Taiwanese firm to tap into OYAK’s 16 percent share of the Turkish cement market, with annual demand estimated at about 73 million tonnes, TCC senior vice president Edward Huang (黃健強) told a news conference at the exchange before the opening bell.
OYAK has 13 cement clinker production lines with annual output of 12 million tonnes, as well as 45 ready-mix concrete plants across Turkey, Huang said.
TCC hopes to leverage the Turkish company’s well-established position in Mediterranean markets to expand both firms’ global reach.
“Our companies share similar and aligned goals,” Huang said regarding OYAK’s motivation to ally with TCC.
TCC has an annual cement production capacity of 75 million tonnes, making it the sixth-largest in the Greater China region, Huang said, adding that its growth and expansion prospects are limited in its existing markets.
Apart from a rapidly saturating market in China, TCC’s expansion efforts have also been curtailed by Beijing’s calls for output cuts, as well as seasonal production shutdowns due to environmental restrictions, Huang said, adding that such measures have become a recurring factor affecting its business there.
TCC and OYAK have not yet formally sealed the deal, but Huang said that agreements such as a memorandum of understanding are better suited for acquisition of assets or corporate stakes.
“Negotiations would be focused on finalizing the joint venture’s shareholder structure,” Huang said, adding that TCC would provide updates as progress is made.
While OYAK’s business is primarily domestic, the partnership has not ruled out expanding sales to Europe and Africa, Huang said.
Following the announcement, shares in TCC rose to an intraday high of NT$34.45 before dropping 1.47 percent to close at NT$33.5 in Taipei trading, while the TAIEX dipped 0.33 percent to 9,489.18 points.
TCC earlier reported that revenue in the first nine months of the year rose 30.03 percent from the same period last year to NT$89.66 billion (US$2.89 billion) as prices were boosted by tight supply in China.
The planned investment still needs approval from various authorities, including the Investment Commission.
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