Saint-Gobain: more acquisitions to follow BPB deal

Saint-Gobain is under no pressure to divest assets in order to pay for its agreed takeover of UK plasterboard manufacturer BPB Plc or other acquisitions, but may sell some businesses, the world“s big…

Saint-Gobain is under no pressure to divest assets in order to pay for its agreed takeover of UK plasterboard manufacturer BPB Plc or other acquisitions, but may sell some businesses, the world“s biggest building materials supplier said on 21 November 2005. “We can perfectly continue our strategy as we have no financing problems, but I think we should sell some activities to continue and improve the structure of Saint-Gobain“s portfolio,” Chief Executive Jean-Louis Beffa told a news conference. Saint-Gobain also intends to take advantage of low interest rates and a flattening out of asbestos claims against the company to make more acquisitions, of small and medium size, in particular in its building distribution sector, Beffa said. “We want to sell assets in a profitable manner. We“ll make these divestments only if they are rightly valued,” he added, declining to say which activities Saint-Gobain intended to sell but saying asset sales would take place in the next 18 months. “I think BPB (deal) has shown that Saint-Gobain knows how to make a acquisition, Our divestments must show that the company also knows how to sell well.” Beffa was talking to press and analysts on the conditions of Saint-Gobain“s GBP 3.9 billion (USD 6.68 billion) offer for BPB after the French firm agreed on 17 November 2005 to take control of BPB. The deal is being financed from a EUR 9.0 billion syndicated loan arranged by Saint-Gobain“s advisers BNP Paribas and UBS, and is expected to complete around the end of 2005. Saint-Gobain“s net-debt-to-equity ratio will double from 57% as at the end of 2004 to around 115% following the BPB acquisition. Although the gearing ratio should be reduced in coming months, Beffa said he did not expect it to return to the levels preceding the BPB takeover. Saint-Gobain expects the merger of its glass-wool unit Isover and BPB to generate cost savings of EUR 100 million by as soon as 2007: EUR 40 million from lower administrative costs and EUR 30 million from savings on transport and warehousing. The company says the delisting of BPB from the stock market should generate an additional EUR 10 million of savings, and it sees synergies from sales forces and marketing of EUR 20 million. Saint-Gobain said it did not include potential growth synergies of around EUR 30 million per year in its figure, which the merged business could reach as soon as 2008 thanks to an enhanced product range and greater geographical reach. “We have important cost synergies but also revenue synergies in the medium term,” said Chief Operating Officer Pierre-Andre de Chalendar, who added that Saint-Gobain“s industrial reorganisation following the BPB acquisition should be complete by the end of the 1Q 2006.