* Sale is conditional to success of Holcim-Lafarge merger
* Proceeds would cut Anglo's expected net debt by 10 pct
(Adds comments, details)
By Silvia Antonioli and Aashika Jain
July 7 Mining group Anglo American Plc
has agreed to sell its stake in a cement venture to its
French-based partner Lafarge SA for at least $1.5
billion, proceeds which will be used to cut debt as part of a
Under Chief Executive Mark Cutifani, appointed more than a
year ago, Anglo has been reshaping its business with a review of
its assets and a programme of jobs cuts.
But the deal is contingent on the go-ahead of a proposed
merger between Lafarge and Swiss-based Holcim Ltd,
which themselves need to restructure to satisfy regulatory
demands if they are to get their deal through.
Anglo's sale of the cement venture Lafarge Tarmac, deemed by
Anglo to be not a key asset, fits in with Cutifani's strategy to
focus on core activities while divesting any underperforming and
Lafarge Tarmac was formed in January 2013 as a 50-50 joint
venture between Lafarge UK and Anglo's building materials
Anglo said the sale agreement was only provisional, but it
was making the announcement because Lafarge intends to offer to
divest the whole joint venture as part of its proposed merger
The mining group said it expects to use the proceeds from
the planned sale, which it put at at least 885 million pounds
($1.5 billion) in cash, to pay down debt.
WAIT AND SEE
"It's certainly a positive for Anglo American if they can
get it done. This will take about 10 percent off their expected
net debt of $15 to $16 billion by 2015," analyst Ben Davis at
brokerage Liberum Capital said.
"There are just a lot of questionmarks on whether Holcim and
Lafarge can get the regulator's approvals. We know the building
materials market in Europe is very concentrated already, so we
have to wait and see whether it goes through."
Anglo noted the sale of its Lafarge Tarmac stake was subject
to a number of conditions, including the completion of the
Lafarge and Holcim need to shed around 5 billion euros ($6.8
billion) in assets to help persuade competition regulators to
back the merger, which was unveiled in April and would create
the world's biggest cement maker with $44 billion in annual
Competition regulators in some 15 countries, as well as the
European Commission, are expected to scrutinise the
Anglo said it would work with Lafarge towards finalising the
terms of a definitive agreement in the third quarter of 2014.
"The deal is in line with Anglo's stated strategy to
consolidate its operations and focus on core divisions," Citi
analysts said in a note to clients.
"Though the deal value is just 4.1 percent of the company's
current (stock) market capitalisation, we believe it will
provide much needed support to Anglo's balance sheet."
Anglo American shares were down 0.4 percent by 0933 GMT,
compared with a 0.7 percent fall in London-listed mining stocks
as a whole.
($1 = 0.5877 British pounds)
(Reporting by Aashika Jain in Bangalore; Editing by Sunil Nair
and David Holmes)