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Cemex and Penna Cement Unable to Agree Terms

World Cement,

P. Prathap Reddy, a senior Congess leader from Andhra Pradesh, the owner of Penna Cement, has been in talks with Cemex regarding the Mexican company’s potential purchase of a major stake or the whole company. It is reported by Indian sources that these talks were held against the backdrop of the acquisition of Bharathi Cement, owned by YS Jagan Mohan Reddy, son of the late Andhra chief minister Y S Rajasekhara Reddy, by Vicat.

Penna Cement which has the capacity to produce 4.7 million t of cement caters to markets in Karnataka, Andhra Pradesh, Tamil Nadu and Goa.

It is said that Penna Cement is seeking a valuation of US$ 160 -170/t, but Cemex has been offering US$140 /t. Investment banking sources have said that a proposed deal at US$ 150 -160/t was far less than the US$ 200/t paid by Vicat for Bharathi. The difference is that the Bharathi plant is a new plant, whereas Penna’s plants are comparatively old and do not attract the same sort of price.

Penna erected a 2 million tpa plant in 2007-08 at a cost of about US$ 130/t. In 2003-04, the company built a 2.8 million tpa plant at around US$ 120-124/t.

Reddy has denied that the deal is completely dead, stating that  talks will resume in 10 days.

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