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Analysts Expect Cemex Bid for Rinker to Succeed

A $14 billion bid by Mexico's Cemex for Rinker Group was likely to succeed, analysts said on Wednesday, paving the way for the largest cash takeover of an Australian company.

Rinker's largest shareholder Perpetual Investments, which holds a 10.5% stake and opposed previous bids as too cheap, has yet to say whether it supports the new offer.

But analysts said its vote may not be vital to the bid's success as Cemex , the world's No. 3 cement maker, may have the financial independence to waive an existing 90% minimum acceptance provision.

"If pressed we believe Cemex could relax this bid condition," Credit Suisse said in a note to clients. Alternatively, analysts said any move by Perpetual to accept the offer would be "very compelling" for the balance of the shareholders.

Perpetual's head of Australian Equities John Sevoir said the fund manager was in no hurry and would continue to evaluate the offer.

The revised bid of $15.85 is at the lower end of an independent expert's valuation and equates to a 22% premium on the initial offer and a 5% premium to Rinker's closing share price last week.

"We think it will probably get up," ABN AMRO analyst Simon Thackray said. "With the absence of an overbidder coming in, which we think is less likely now, we'd say Rinker has probably exhausted most of their options and that's why they're in a position they'd have to recommend the deal."

The Rinker board recommended the revised bid on Tuesday, saying it had been unable to find any alternative that gave the same sort of risk-adjusted return to shareholders.

Macquarie Research analysts said they also believed Cemex's final bid was likely to succeed. "Compared to the Vulcan Materials ($4.6 billion) bid for Florida
Rock, this deal now appears reasonable," Macquarie said in a note to clients, citing comparable earnings multiples.

Cemex has declared the offer its "best and final" in the absence of a superior proposal.

But Goldman Sachs JBWere said other leading industry players would not get anywhere near the synergy benefits available to Cemex and the chance of an alternate bidder emerging was low.

"The ability of Rinker shareholders to hold out for a higher offer from Cemex also appears limited," the investment firm said in a client report.

ABN AMRO Morgan's Thackray said retail investors would be attracted by provisions giving them the option of accepting a fixed A$19.50 per share for their first 2,000 shares.

"If people take a view the Australian dollar will appreciate significantly over the next few months then it is in their interest to try and accelerate the process," Thackray said.

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