Cemex Gets A Hold As Rinker Backs Bid

RINKER Group has urged its shareholders to accept a $17 billion takeover offer from Mexican construction materials group Cemex, after warning of the "high degree of uncertainty" surrounding its future earnings and the recovery of the US housing market.

The warning came despite the company managing so far to fend off the impact of the deteriorating US housing market by reporting a 6 per cent lift in net profit to $US782 million ($A947 million) for the 12 months to March 31.

"We had a good result that was delivered in difficult circumstances," said Rinker managing director David Clarke.

The improved result was helped by a rise in construction material prices and Rinkers cost-cutting efforts, which had resulted in the laying off of 1000 employees during the year.

Mr Clarke noted, however, the sharp downturn had started to bite, with Rinkers US operations suffering a 11 per cent fall in profit in the fourth quarter.

He noted how housing permits in Rinkers key state of Florida had fallen 52 per cent in the first three months of the year, and that conditions in Nevada remained soft.

However, in a phone hook-up analysts expressed surprise that Rinker had reported an improvement in profit margins on the previous quarter.

Mr Clarke said Rinkers profit for the coming year could remain steady if there were signs of a recovery in Florida.

If volumes and prices stayed at current levels, Mr Clarke said profits could fall a relatively modest 10 per cent. This compares with the 34 per cent slump Cemex reported on Thursday in its US pre-tax profit in the first three months of this year.

Rinkers largest shareholder, Perpetual, which rejected Cemexs earlier $US13-a-share offer, is yet to signal whether it will accept the revised $US15.85 ($A19.02 offer). Perpetuals 10.32 per cent stake is enough to block the bid.

Australian Foundation Investment Company, which holds 0.7 per cent of Rinker, is the only institutional shareholder to have expressed opposition to the latest offer.

Cemexs financial director and head of planning, Hector Medina, will fly into Sydney on Monday in an attempt to sway institutional shareholders.

The Cemex camp was quick to seize on comments made by Rinker chairman John Morschel in a supplementary Targets Statement recommending the bid. Despite the offer price being at the lower end of a $US15.85 to $US17.74 target range set by independent expert Grant Samuel last year, Mr Morschel said in a letter to shareholders that the expert indicated "it has no reason to believe that its valuation range … would have increased and, if anything, may have decreased slightly".

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