San Francisco Frontiers - Cement giant Holcim eyes US reindustrialisation to boost N. America spinoff

Holcim, one of the world's largest cement makers, announced Sunday that it plans to fully spin off its North America business and list it on the New York stock exchange during the first half of 2025.

It suggested the new North American building solutions company might be valued at over $30 billion, and saw its share price surge when markets opened Monday morning.

The North America branch "is a rock star business," company chief Jan Jenisch told reporters after the announcement, adding that spinning it off was the "natural next step".

"This is simply too successful to be run as a subsidiary," he said.

Holcim, which merged in 2015 with French group Lafarge, has strengthened its North American presence considerably in recent years through a string of acquisitions.

The branch has seen its sales balloon by around 20 percent annually, and will aim to nearly double its current sales to more than $20 billion by 2030.

This would be possible, Jenisch explained, thanks to booming home construction and infrastructure projects, and measures aimed at US "reindustrialisation".

- No risk of change -

US President Joe Biden's Inflation Reduction Act (IRA), which was approved by Congress in 2022, will direct around $370 billion to green industrial projects, including the production of electric vehicles and solar panels.

The aim is to incite industrial investment on US soil, which in turn has already begun swelling demand for construction materials like those provided by Holcim.

Jenisch said that the company had already landed more than 100 infrastructure projects.

And even though presidential elections are looming, with Biden expected to again face off against his predecessor Donald Trump, Jenisch said he thought the boom would continue.

"I don't really see the risks why this should change," Jenisch said.

"While the current president and the previous one appear to be different, their economic policy is very consistent."

Jenisch pointed out on a call with analysts that Trump had pushed for reindustrialisation and for infrastructure programmes, and the Biden administration has enacted those into law.

"I think this reindustrialisation is going in full swing and will not stop with whatever outcome we have in the November election," he said.

- A 'value-creating move' -

Jensich, who has headed Holcim since 2017, is due in May to hand over the reins to Miljan Gutovic, the current head of the company's European operations.

But Jenisch will remain on as chairman of the group and will lead the US listing process.

Analysts hailed the spinoff plan, with Mark Diethelm of Swiss investment manager Vontobel describing it as "the next step for growth and value creation".

Investors also appeared pleased with the announcement.

Shortly after markets opened Monday, Holcim saw its share price jump more than six percent, before shedding some of that gain.

By mid-afternoon, it was trading up just shy of four percent at 66.76 Swiss francs ($77.27) a piece, while the Swiss stock exchange's main SMI index was up just 0.1 percent.

Holcim still needs shareholder approval for its spinoff plan, with the decision due to be made during an extraordinary general assembly at a yet-to-be-determined date.

Jensich voiced confidence that Holcim would get the blessing it needed to move ahead with the deal, telling journalists Sunday that it would be "a very value creating move... and will be to the benefit of the shareholders".

Analyst Glynis Johnson of the US investment bank Jefferies cautioned in a note though that there were potentially several sticking points.

"Possible push backs we believe will likely be the most pronounced from those shareholders who will not be able to hold the US-listed stock," she wrote.

"Allocation of debt" between the new North American company and the remainder of Holcim could also be an issue, she warned.

J.Scott--SFF