CEMEX and the Rinker Acquisition
Amanda Madray
Southern New Hampshire University
FIN - 336
Yvan Nezerwe
July 17,2022
As one of the largest cement producers in the world Cemex originated in Mexico
Founded in 1906, the company rose to success, most of it was built on acquisitions and the
mergers of companies. Cemex's infamous acquisition process that started in 2006 aimed at the
Rinker Group, which is an Australian based building material company. They claimed that strong
benefits would come from this merger, diversifying and strengthening the company even further,
increasing market share, expanding global reach and significant cost synergies. After Cemex
increased their bid by 22%, they were able to finalize the deal in 2007 while taking on a sizable
lump sum of debt. Unfortunately, the Global Financial Crisis was drawing near and the housing
market was already beginning to decline, which was bad news for Cemex and many other
businesses. Due to the acquisition, the company had approximately $14 billion in short-term
debt, which they were confident they would be able to pay down substantially before refinancing
the balance as long-term debt.
Although the market was slipping Cemex was optimistic they would close 2008 with a
higher EBITDA than the year prior, especially because the US was only a small percentage of
their revenue. Yet, Q3 2008 sales were down not only in the US (by 25%), but also in Mexico
(down 10%), and Spain (down 26%). The Mexican peso fell, housing continued to tumble
sharply, and the company's profitability also continued to decline. Cemex's hedging program was
instilled to protect the firm from adverse exchange rate movements but was doing the exact
opposite leading to increased losses. The Global Financial Crisis led to a decrease in most
markets, banks refusing to take calls, saying no to refinancing debt. This caused many companies
to go into crisis mode, Cemex being one of them. Since banks were silent Lorenzo (CEO of
Cemex) was having a difficult time following through with his acquisition plan like expected.
Being $5.5 Billion in debt due in 2009, Cemex needed cash flow now, but how in light of the
collapse of world markets? A workable financial strategy was required to generate cash flow and
enable them to restructure the $5.5 billion debt.
Thanks to their earnings from the merger in 2008, the firm was able to pay off some debt.
reinvest $1.747 billion, and distribute $0.476 billion in dividends to stockholders. Selling assets
and issuing new shares helped them pull through and end 2008 in an okay position by improving
cash balance. In 2009 the firm could not just rely on sales numbers because if they were anything
like their 2008 final numbers then they would be in financial distress. Cemex made the choice to
sell additional assets in order to maintain business operations and satisfy creditors, selling their
operations in Hungary & Austria for $480 million.The firm planned to continue selling assets in
2009, but the market was volatile during the crisis, makin