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Friday, February 23, 2024

Strategic Shift: Swiss Construction Leader Holcim considers U.S. Business Separation

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Holcim Ltd. jumped after the Swiss cement maker said it will spin off its North American unit into a separate US-listed entity, a move that could unlock a higher valuation for the business.

The US arm had about $11 billion in sales last year — about one third of Holcim’s total — and could be valued at more than $30 billion, the company said. Holcim shares climbed as much as 14% in early trading, the most since March 2020, and were up 4% as of 1:50 p.m. Zurich time, valuing the entire company at almost 39 billion Swiss francs ($45 billion).

US listings have become increasingly appealing to European companies because a wider investor base and bigger pool of capital offer the prospect of higher valuations. Holcim’s move for its US division follows the decision of fellow materials giant CRH Plc to shift from London to New York last year. The Zug-based company expects to complete the spin-off in the first half of 2025.

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Reacting to the news, Citigroup Inc. analyst Ephrem Ravi noted that US-listed building-product companies trade at a significant premium to European-listed peers. Zuercher Kantonalbank analyst Martin Huesler calculated the US business’s fair value at around $35 billion to $40 billion.

“It is a big advantage to have a customized capital structure for this business and to be in the US dollar,” Holcim Chief Executive Officer Jan Jenisch said in an interview Monday with Bloomberg Television.

Jenisch is stepping down from his role as CEO, and will be replaced by Miljan Gutovic, currently the head of the European business. Jenisch will remain chairman and lead the planned US listing of the North American business. He said the company would consider buybacks to help smooth the transaction.

The US market is growing at a rapid pace as builders race to relieve a chronic lack of single-family homes and meet regulatory pressures for more energy-efficient buildings. The unit expanded through an acquisition spree that broadened its offering of building materials.

Holcim says the North American business is the No. 1 player in cement and No. 3 in roofing, and it aims to roughly double sales to about $20 billion by 2030.

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©2024 Bloomberg L.P.

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