The world's third-largest cement maker, Mexico's Cemex S A B de C V  today that it has reached an agreement to sell its Australian operations to Switzerland-based building materials group Holcim for approximately A$2.02 billion, subject to fulfilment of closing conditions in six months.

The sale also includes Cemex Australia's 25-per cent stake in Cement Australia, in which Holcim already owns a 50-per cent stake.

Cemex expects to improve its financial flexibility and reduce its $14.5-billion debt. The deal will will enable Cemex to implement $900 million in recurrent cost savings; rationalisation of capital expenditures; and reduce its total debt, acquired from the $15.3-billion Rinker acquisition.

For Holcim, which said it would finance the deal entirely from a proposed rights issue of $1.86 billion, the acquisition comes at an extrremely attractive valuation given Cemex's large debt load that has to be paid by the end of 2011.

Hplcim would gain 384 facilities owned by Cemex Australia, one of the leading producers of aggregates, ready-mix concrete and concrete pipe in Australia, will divest its 249 ready-mix concrete plants, 83 aggregates quarries and 16 concrete pipe and products plants - a total of 348 facilities located throughout Australia. Cemex in 2008 reached sales of approximately A$1.86 billion and an EBITDA of approximately A$313 million. The company currently employs approximately 2,800 employees.

In addition, Hplcim would gain Cement Australia's annual production capacity of 5.1 million tonnes of cement, including from an ongoing expansion, from four cement plants and one grinding plant as well as several terminals and distribution centers along the east coast of Australia and in Tasmania. In 2008, Cement Australia posted sales of approximately A$995 million and an EBITDA of approximately AUD 196 million.

Cemex Australia's most important markets are located in the country's densely populated eastern and southeastern states and in the mining belt of Western Australia - all of which are markets amongst the fastest growing regions in Australia which will benefit Holcim in the long run.

Cement Australia is presently proportionately consolidated by Holcim and will be fully consolidated post transaction.

According to Holcim, this is important strategic acquisition which enables the group to move into the aggregates and concrete business in an attractive mature market.

Australia  has large reserves of natural resources like coal, iron ore and bauxite, which are important for the Asian region, especially China and India. Cement Australia is the country's largest cement producer and Cemex Australia is present in all important markets. The combination of these companies enables Holcim to include Australia in its strategy of expanding its aggregates and ready-mix concrete business in mature markets.

Last August, Cemex was considering the sale of 16 of its concrete pipes and products manufacturing plants in Australia, after it spent $15.3 billion on purchasing Rinker and said it would use the sale proceeds to pay off its debt. (See: Cemex set to sell part of cement pipes businesses in Australia)

In November 2008, Cemex sold its plant in Canary Islands to reduce debt from Rinker acquisition to Spanish investment holding company Cimpor Inversiones SA for approximately €162 million euros (See: Cemex sells plant in Canary Islands to reduce debt frrom Rinker acquisition)

Cemex's debt from its $15.3-billion Rinker acquisition, has been compounded with the global credit crisis and consequent economic slowdown, which  led to a fall in demand for its products.

In April, Cemex said it anticipates to realise an additional $200 million in cost savings which would be fully implemented before the end of the year, bringing the total expected savings from its cost-cutting initiatives to $900 million, which includes $700 million previously identified.