Portfolio Update: Cemex USA shores up Texas holdings with two deals

Finalized at the end of July, Houston-based Cemex USA announced that it had entered into an asset swap with Dallas-based Texas Industries (TXI) that would result in Cemex taking over seven ready-mixed plants in the Houston area, where TXI will continue to operate cement and aggregate terminal operations along with packaged materials facilities. Meanwhile as part of the transaction, TXI acquired three ready-mixed facilities and rights to an aggregate quarry in the metro area of state capital Austin. The deal further strengthens Cemex's position as a vertically integrated construction materials supplier in one of the nation's largest concrete markets.

In addition, the deal allows TXI to further supplement the company's growing resources in the region, including the recently-completed acquisition of the Central Texas Ready Mix division—the result of a ready mixed and aggregate asset swap with Trinity Industries/Transit Mix Concrete & Materials—and the current $350 million-plus capacity expansion of its Hunter Cement plant. It also augments TXI's Austin aggregate operations. "We believe the Austin market will experience strong growth over the long-term, and are excited about expanding our leadership position in this region," said Jamie Rogers, vice president and COO.

In early-April 2011, TXI also acquired 23 concrete plants, running north of San Antonio through Hillsdale, Texas, from Transit Mix Concrete. The deal also saw transfer of TXI’s Anacoco, Paradise and Beckett sand & gravel sites—serving markets in east and north Texas, plus Louisiana, some with Transit Mix concrete plants—to Trinity Materials Inc. The investment allowed TXI to optimize its Austin aggregates operations and add new capacity at Hunter Cement, whose output is set to more than double from an existing 900,000 tons/year.

But this deal was only the beginning in what turned out to be a busy month for Cemex. Pursuant to the exercise of a put option by Ready Mix USA, Cemex is set to assume full ownership in the two Cemex USA–Ready Mix USA joint ventures.

Cemex secured a buyout option while expanding the joint ventures with Southeast properties it inherited from its mid-2007 acquisition of Rinker Materials Corp. At $350 million, plus assumption of $28 million in debt, the transaction is valued almost exactly at the level Cemex projected in October 2010, when it announced its intention to consummate ownership of the joint ventures.

The transaction will span a host of assets the partners have contributed to the joint ventures since 2005: 149 concrete plants and 20 block plants located in Alabama, Georgia, the Florida panhandle, along with Arkansas, Mississippi and Tennessee; 10 sand & gravel pits serving certain company concrete operations; plus, cement mills in Demopolis, Ala., and Clinchfield, Ga., and 12 distribution terminals.

Cemex formed the joint ventures shortly after acquiring U.S. giant RMC Industries and its London-based parent, RMC Group. Birmingham-based Ready Mix USA, founded by heirs of University of Alabama football legend Bear Bryant, emerged from the late 1990s as a key player in ready mixed and block throughout Alabama and Georgia. The concrete and aggregate joint venture saw namesake operations integrated with Southeast properties of RMC and Rinker Materials Corp., which Cemex took over in mid-2007. An initial joint venture agreement offered Cemex a buyout option after three years; terms changed as the company rolled additional properties to the concrete and aggregate joint venture following the Rinker deal.