* Holcim to buy Cemex's operations in western Germany
* Companies to combine their Spanish operations
* Holcim to pay Cemex 70 million euros cash
* Holcim shares down, Cemex shares higher
ZURICH, Aug 28 Swiss cement maker Holcim
plans to exchange some assets and combine others with
Mexican rival Cemex in Europe, seeking cost
savings in response to tough conditions in the construction
Holcim said it would boost operating profit by as much as 30
million euros ($40.18 million) as a result of the deal. It will
pay Cemex 70 million euros in cash, mainly reflecting the size
and value of Cemex's German business, which includes some 100
readymix and other plants.
Holcim will acquire Cemex's operations in western Germany,
while Cemex will take over Holcim's operations in the Czech
Republic. The two companies will combine their operations in
Spain, with Holcim taking a 25 percent stake in the combined
Holcim Chief Executive Bernard Fontana has already closed
plants, cut costs and slashed capacity to try to boost
profitability. The deal with Cemex shows he is ready to take
further steps to address overcapacity and seek cost savings.
Fontana said the company would be open to further deals.
"I ... believe we have more opportunities to go on this way,
and if other parties want to do it we will continue," he told a
Cemex shares rose 1.07 percent to 15.10 pesos in morning
trading, while shares of Holcim, which have fallen 10 percent
since the middle of August, were down 1.77 percent at 63.85
Cemex, one of the world's biggest cement companies, has
struggled amid the global economic downturn and a heavy debt
load from costly acquisitions. It was hurt by the 2008 U.S.
housing meltdown shortly after paying out $16 billion to buy
Australian peer Rinker.
Last month it posted a narrower second-quarter loss, helped
by a slight increase in sales and core profit. Sales rose in the
United States, Asia and South and Central America, but Northern
Europe remained sluggish.
Europe historically accounts for about a third of Cemex's
Cemex said the transactions with Holcim were not yet final
as the companies await approval from competition authorities and
Cemex executives said on a call that their legal team did
not expect any regulatory problems.
"When it is finalised, this will be an important strategic
step that should allow Cemex to improve its footprint in Europe
and consolidate our portfolio in the continent," Cemex CEO
Lorenzo Zambrano said in a statement filed with the Mexican
stock exchange on Wednesday.
"These strategic transactions show Cemex's commitment to
create value and return on capital," Zambrano said later on
Analyst Christian Arnold at private bank Vontobel said
Holcim was in the best position to benefit from asset swaps in
the industry as it has the most financial flexibility and the
highest credit rating among its peers.
"However, this transaction has a smaller impact on Holcim's
earnings than the current currency weaknesses in emerging
markets in the short term," said Arnold, who has a "hold" rating
on the stock.
Holcim is rated BBB by ratings agency Fitch, compared with
BB+ for rivals Lafarge and HeidelbergCement
and B+ for Cemex.
Holcim said it had not yet made any final decisions on the
number of job cuts envisaged as a result of the deal.
The transaction is expected to close in the fourth quarter,
subject to approval from authorities.
Earlier this month, Holcim reined in its full-year profit
forecast due to a slowdown in India, its biggest market. It said
it should achieve underlying growth in core earnings this year,
having previously forecast "significant" growth.