CEMEX announces significant progress towards finalizing a negotiation with Thailand's TPI Polene
September 24, 2001
CEMEX, S.A. de C.V. (NYSE: CX) announced today that it has made significant progress towards finalizing an negotiation of an agreement under which CEMEX could acquire a controlling stake in Thailand's TPI Polene subject to several conditions being met. The negotiations had been initiated with the plan administrator, Mr. Prachai Leophairatana TPI Polene's CEO, under the rehabilitation program of Thai cement producer TPI Polene, and would be subject to the approval of the creditors. Such approval may be obtained subsequent to a scheduled creditor meeting on September 25th 2001.
Under the agreement currently under negotiation, CEMEX could subscribe to an issuance of shares by TPI Polene for US$300 million representing approximately 72.5% of the company's enlarged share capital. The US$300 million capital injection would be funded by the divestiture of non-core assets from CEMEX's current portfolio valued at approximately US$200 million and free cash flow generated after September 30th 2001. The capital injection would be used in its entirety to reduce debt at TPI Polene. The transaction would be expected to close by the end of the first quarter of 2002.
The closing of the proposed transaction will be subject to final terms and conditions to be agreed upon by CEMEX and TPI Polene's plan administrator under the rehabilitation program and the company's creditors. The closing is also subject to written confirmation by the rating agencies that CEMEX will maintain its current ratings (BBB- and Ba1) after giving effect to this acquisition, no economic or political developments occurring which could adversely impact the business of TPI Polene. In addition, the transaction is subject to the absence of significant or major developments occurring in the economic situation or financial markets in Mexico or in the United States, which in the opinion of CEMEX could have a material adverse impact on the financial or operating conditions of CEMEX.
Hector Medina, Executive Vice President of Planning & Finance, said: "The possibility of this investment in Thailand is in line with our goal of global diversification and business expansion in Southeast Asia. It reinforces our position in the region and provides important synergies when merged with our Thai operations and our trading business as the Thai market is the largest exporter in the region and is also the largest supplier to United States. TPI Polene allows us to participate in an attractive market that offers long term potential."
Rodrigo Treviño, Chief Financial Officer, said: "We continue to be committed to our targeted steady state capital structure and our investment grade rating. If the proposal were to be accepted by TPI Polene's creditors, it would reduce the total debt at TPI Polene to approximately US$500 million before the sale of non-core assets at TPI Polene, which are valued at more than US$100 million. This allows us to continue to improve our coverage ratios and will have a positive contribution to our cash earnings and free cash flow of full year 2002, which makes it attractive and in line with our acquisition criteria. The acquisition will be executed only after we have obtained confirmation from the rating agencies that our current ratings will be maintained upon closing."
TPI Polene, the cement business of Thai Petrochemical Industries Plc, a Thai conglomerate, is one of Thailand's leading cement producers with a current production capacity of nine million metric tons per year and a market share of approximately 20%. It currently operates at almost full capacity selling roughly 50% of its production in the domestic market and the rest through the export markets. In addition to its current capacity TPI Polene's has substantially completed a capacity expansion of up to 3 million metric tons. This incremental capacity can become operational with additional capital expenditures of approximately US$80 million.
CEMEX is one of the three largest cement companies in the world, with approximately 78 million metric tons of production capacity. It is also the world's largest trader of cement and the world's leading producer of white cement. CEMEX is engaged in the production, distribution, marketing, and sale of cement, ready-mix concrete, aggregates, and clinker through operating subsidiaries on four continents. For more information, visit www.cemex.com.
Daniel Pérez Whitaker
(528) 152 2747
(528) 328 3631
José Antonio González