Chinese Firm Reaches Final Deal to Acquire Nigerian Cement Company to Rival Dangote, BUA, Others
- The Chinese firm acquiring Holcim’s share in Lafarge Africa has valued the 100% stake at $1.6 billion
- The foreign firm will reportedly be paying $838.8 million to acquire Holcim’s share in the company
- If finalised, Lafarge Africa would become one of the Nigerian Exchange Limited's most valuable firms
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
Huaxin Cement Company, the Chinese firm expected to buy out Holcim’s 83% stake in Lafarge Africa, has reportedly valued 100% of the company’s shareholding at $1.6 billion.
The group will spend $838.8 million in acquiring Holcim’s stake in Lafarge Africa, estimating the company's enterprise value to be between $1.06 billion and $1.59 billion.
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According to a report by Business Day, the company's valuation was disclosed in its filing on the Hong Kong Exchange.
This estimated cement prices in Nigeria to be between $100 and $150 per tonne, based on Lafarge’s annual production capacity of 10.6 million tonnes.
The firm also assumed the replacement value of Lafarge Africa’s assets to be $1.2 billion to $1.4 billion, with an enterprise value of $1.057 billion.
The Chinese firm used an alternative valuation approach: it multiplied Lafarge Africa’s 2023 EBITDA of $151 million by a factor of seven, resulting in an enterprise value of $1.057 billion.
Lafarge Africa stated that the acquisition aligned with Huaxin’s overseas expansion plan, focusing on leveraging its expertise in industrial technology and production chain integration to drive growth.
Chinese firm to introduce new technology
Huaxim also aims to counter the effects of China’s domestic market shutdown, which could mark a significant shift in Nigeria.
Indian cement firms previously dominated the sector before the arrival of Dangote Cement, Africa’s largest manufacturer.
Insiders have said Huaxin is developing a new pricing model that could disrupt the Nigerian cement industry and potentially crash prices.
Lafarge Africa’s share price rises
Huaxin’s entry into the Nigerian cement industry will mark the beginning of the introduction of new technologies, production methods, and pricing models.
If finalised in August next year, with the exchange rate at N1,700 per dollar, Lafarge Africa’s market cap would be about N1.87 trillion.
Since the deal was announced on December 1, 2024, the cement company’s share price has skyrocketed by 21%, hitting a high of N70.15 as of December 3, 2024.
Experts said the new deal could cause cement prices to crash in Nigeria, as the new company will have a different pricing model and new technology.
Cement prices in Nigeria have soared recently, with brands selling for as much as N8,000 per 50kg and N7,500 amid a spike in construction costs.
Dangote, BUA, Lafarge earn N3.6trn in sales
Legit.ng earlier reported that three of Nigeria's biggest cement manufacturers earned a combined revenue of N3.632 trillion in the third quarter of 2024.
Dangote, BUA, and Lafarge Africa's respective revenue represented a 6.3% increase from N2.140 trillion earned by the firms in the same period in 2023.
The new sales volume comes amid economic challenges that disrupted Nigeria's business environment, such as the forex crisis and rising energy costs.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
Source: Legit.ng
