Cantillon

Inside the world of business

Cemex likely to make offer for outstanding Readymix shares

THE 25 CENTS a share that Cemex looks prepared to offer for the outstanding shares in Readymix that it does not own is a far cry from the value put on the company at the time the Mexican giant acquired the Irish building materials business.

Cemex acquired a majority stake in Readymix in 2004 after it took over RMC in Britain, which owned 60 per cent of the Irish company.

In September 2004, when RMC agreed a deal with Cemex, shares in Readymix shares rose 13 per cent to €1.75. This valued the Irish company at almost €190 million.

The “possible offer” that is now on the table, and the independent board members, Adrian Auer and Donal O’Connor, seem set to recommend, values it at less than €27 million.That values it at about 15 per cent of its September 2004 price tag. Readymix was trading around the 22-cent mark yesterday, giving a market capitalisation of €24.1 million.

It would be hard for the board not to recommend the 25 cent a share offer if Cemex were to make a firm commitment to pay that.

Yesterday’s statement from the committee said it would recommend the bid if it were to graduate from being “possible” to an actual offer. The statement noted that the committee took a several things into account before deciding this:

The €35 million loan from Cemex which is due for repayment in 2014;

The “uncertain” – for this read abysmal – construction market;

The likelihood that it will continue losing money and the lack of an alternative offer for either the company or its assets.

Summing that up: Readymix is a debt-laden, loss-making business in a market that looks unlikely to recover from a devastating collapse, that nobody other than Cemex wants to buy.

The choice facing the holders of the 40 per cent that Cemex does not own looks like a simple one: accept the 25 cent and let the multinational work out the company’s future, or turn it down and watch the shares plummet to one-tenth of that, and then spend two years working out a way of repaying the debt due to the parent in 2014.

Food and drink firms to showcase array of goods

Some 177 Irish food and drink companies will today have an opportunity to showcase their products to an array of buyers from the retail world. More than 520 buyers from domestic and international retail – representing 28 countries – are attending MarketPlace International at the Convention Centre in Dublin .

The biennial event, which is the culmination of months of planning by Bord Bia, is an impressive logistical feat. More than 4,500 separate meetings between suppliers and buyers have already been planned – equal to more than 20 meetings per supplier.

For Irish foods producers, the event is an invaluable opportunity to gain some face-time with retailers. In the relatively closed world of consumer foods, retailers still hold the balance of power, and small producers in particular face an uphill battle in getting their products on shelves. While most producers are reluctant to speak out, the process of securing a coveted “listing” with a supermarket chain often involves ruthless negotiations between retailers and suppliers, with suppliers constantly under pressure on price.

While MarketPlace International is an innovative opportunity to showcase Ireland’s food and drink offering, it also serves as a reminder of the need for the Government to introduce a code of practice to guard against unfair practices in the grocery business.

Last June the Minister for Enterprise indicated that he planned to ask Government for approval on a statutory code of conduct governing the behaviour of retailers and their suppliers, after a report failed to find agreement within the retail sector on a voluntary code.

Perhaps today’s event will serve as a reminder of the importance of moving forward on what is a notoriously contentious issue.

‘Strange division’ marks media diversity forum

There was, as Dr Aphra Kerr from NUI Maynooth pointed out, “a strange division” drawn between old and new media at a conference on media diversity in Dublin yesterday. This was strange because it is often the same organisations involved in both: “They are all looking for business models that will work online.”

Indeed, the current business models are wobbling precariously. Thomas Crosbie Holdings, the chairman of which, Alan Crosbie, left no one in doubt as to his feelings about online media, is just one example. The group, which owns Breakingnews.ieand RecruitIreland.comas well as a number of "traditional" newspapers and radio stations, made a pretax loss of €6.3 million in 2010, a year when revenues declined 13 per cent. In a "fickle" advertising market, reserving a cut of the licence fee for "public service" newspapers would provide a nice revenue boost as well as handily differentiating legacy media from online start-ups and upstarts. But, as Crosbie conceded, it would also be something of a political impossibility.

Striking a much friendlier position in relation to new media was Minister for Communications Pat Rabbitte, who noted that “anyone with a smartphone” could become a journalist. But Séamus Dooley, secretary of the National Union of Journalists, said: “It takes something smarter than that.”

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