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Building materials giant Holcim eyes $30 billion valuation with North American spin-off

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Switzerland’s Holcim

Its shares were 5.45% higher in early Europe trading Monday.

Miljan Gutovic, currently head of Europe at Holcim, will replace Jan Jenisch as CEO beginning May 1, said the company, one of the world’s biggest cement makers.

In the biggest shake-up at Holcim since the Swiss company took over French rival Lafarge in 2015, the divestment will likely be completed in the first half of 2025.

“Our North American business is a real rock star. We doubled the company just in the last four years by strong organic growth, by acquisitions. And we have leading margins, the EBITDA margin is already above 27%,” Jenisch told CNBC on Monday.

“Now I’m happy we can kick off the next level of performance for the business to take it to $20 billion of sales. We want to separate it to have more focus on the North American customers, on getting all the synergies from our supply chain.”

The spin-off could value the new company at around $30 billion, Jenisch told reporters, with Holcim retaining no stake.

“We’re going to do a full capital market separation of our North American business, so we will list 100% of the business on the New York Stock Exchange,” said Jenisch, who was confident of getting shareholder backing for the flotation.

Jenisch told CNBC that Holcim’s operating model was already focused on North America, with five R&D centers in the region. The company sees “minimum implementation costs” of the spin-off, he added.

The U.S. business aims to boost annual sales from around $11 billion at present to more than $20 billion and generate operating profit of more than $5 billion by 2030, the company said.

The rest of Holcim’s global business – in Europe, Latin America, Africa and Asia – would remain listed on the Swiss blue-chip SMI index, and focus on building solutions like roofing products.

Jenisch, who has led Holcim since 2017, will remain as chairman and will lead the planned listing in the U.S., where building materials companies trade at higher earnings multiples than in Europe, potentially improving its valuation.

Analysts were positive about the listing, which would be one of the biggest in the construction industry for many years.

“As transatlantic synergies are limited, it makes sense to me,” said Zuercher Kantonalbank analyst Martin Huesler.

“The valuations of U.S. building material peers are higher than Holcim, so I consider it as positive.”

The transaction has been planned for a long time, according to a person familiar with the matter, and came about because Holcim thought its North American business was undervalued compared to peers like Carlisle, RPM and James Hardy.

Holcim North America was trading at only 7 times operating profit, far less than the 10 to 15 times multiple of peers.

Describing the U.S. as one of the world’s most attractive construction markets, Jenisch said the move would help the new company capitalize on the region’s infrastructure and construction boom.

Holcim is the biggest cement maker in North America, where it employs 16,000 people across 850 sites. The business competes in the region with companies like Carlisle, and RPM in building products and solutions, and Eagle Materials and Summit Materials in the cement industry.

The North American business made up a quarter of Holcim’s sales in the first nine months of 2023, and was also the company’s most profitable region, with sales growing by more than 20% on average in recent years. The remaining Holcim business will have sales of around 17 billion Swiss francs ($19.69 billion), and employ 48,000 people.

The U.S. operations were “simply too successful to be run as a subsidiary,” Jenisch said.

CNBC’s Jenni Reid contributed to this report.

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