[miningmx.com] – ANGLO American is to sell its 50% stake in its construction materials joint venture Lafarge Tarmac – a transaction that will punch a $1.5bn hole in its debt pile estimated to range between $14bn and $15bn.
The group said in an announcement today that an ‘in-principle’ agreement had been reached for the sale, but added it was subject to the approval of the competition authority and the closure of a proposed merger between Lafarge and Holcim.
The combination of Tarmac and Lafarge in 2012 attracted the scrutiny of the UK’s Competition Commission which said it could endanger competition in that market.
Anglo said it had decided to announce the transaction because Lafarge intended to sell the joint venture as a means of having its merger with Holcim pass muster with the European Commission.
Said Anglo: “Lafarge and Holcim have announced that they expect the merger to be completed in the first half of 2015. Anglo American and Lafarge will work towards finalising the terms of a definitive agreement in Q3 2014”.
“In the event that a subsequent divestment of Lafarge Tarmac is agreed within 18 months of this sale being completed, then Anglo American will participate in a minority proportion of the upside beyond a small premium to the terms of this proposed transaction,” it said.
Anglo said that it expects to use the proceeds to pay down debt which has been estimated by analysts to be between $14bn to $15bn.
The intention is to take the debt figure in the medium term down to $10bn to $12bn, a goal that production from Minas Rio, as well as the commissioning of the Grosvenor coal project in western Australia could assist in doing.
Anglo has been divesting of non-core assets since listing in London, but this latest deal will be seen as another important milestone in the restructuring proposed by the group’s CEO, Mark Cutifani, who said in July 2013, the group was top heavy with projects and non-core assets.
It’s likely that he will next turn his attention to the group’s Rustenburg platinum assets which have been identified as non-core and will most likely be sold, analysts have said.
Cutifani has identified a return on capital employed of 15% by 2016 which would require a doubling in 2012’s pre-tax profits to $7.3bn.
