Mexico's Cemex received conditional approval from U.S. authorities for its $12 billion bid for Australia's Rinker Group, paving the way for Cemex to make its next move in the drawn-out takeover battle.
The U.S. Justice Department said on Wednesday it would require Cemex to sell 39 U.S. facilities if it is successful in a bid for the Australian building materials maker.
Analysts say Cemex will have to increase its offer -- Australia's second-largest takeover bid -- to win over Rinker shareholders, but it had not been expected to make any move until its bid won approval from U.S. authorities.
"From our point of view the bid is now cleared to proceed," a Cemex spokesman said.
Rinker shares rose 2.2% to 18.47 Australian dollars on hopes of higher bid, compared with the $13 (15.86 Australian dollars) bid price.
However, analysts said with the United States housing downturn, increasing U.S. interest rates and the softening U.S. dollar all putting pressure on Rinker, Cemex was under no pressure to move quickly.
"I don't see a reason for them to need to be urgent on it," Macquarie Equities analysts Andrew Dale said.
"With conditions in Florida not looking great, you have a situation where Rinker is reporting in probably four weeks so it would make more sense to me for them to wait for that."
Lowered its Earnings Forecast
Credit Suisse on Thursday lowered its earnings forecast for Rinker by 5.3% in 2007/08 and 3.5% in 2008/09 on the back of a sustained U.S. housing downturn.
Rob Patterson from Argo Investments, a major investor in Rinker, said Cemex would still have to increase its bid to succeed, and the housing downturn was a short term phenomenon.
"If they want Rinker they'll have to pay up, that's our take," Patterson said. "We're a long term investor and Rinker's got strategic assets."
Credit Suisse said Cemex would have to offer more than 19.50 Australian dollars to have any chance of success. Macquarie Equities said a bid would have to exceed 20 Australian dollars a share to win over Rinker shareholders.
Sources close to the matter have told Reuters that Rinker has also held takeover talks with rival companies such as Vulcan and Lafarge, as well as private equity firms.
Under the U.S. Justice Department ruling, Cemex will have to sell the facilities in Arizona and Florida if it wishes to proceed with the takeover.
Without the divestitures, prices would likely increase for ready mix concrete, concrete block and aggregate sold to customers handling large building and Transportation Department projects, the Justice Department said.
Rinker, whose board has rejected the Cemex offer, makes around 85% of its earnings in the United States.
Monterrey-based Cemex, which operates in more than 50 countries, extended the offer for a third time last month to April 27.