Hanson PLC Transaction would create the world’s second largest cement and building materials company behind France's Lafarge SA.

HeidelbergCement AG, after weeks of speculation, on May 15 announced a $15.8-billion buy-out of British building materials supplier Hanson PLC. The deal creates the world's second-biggest cement and building materials company behind France's Lafarge SA. HeidelbergCement agreed to pay $21.08-a-share in cash for the London-based rival, which is a 29% premium over Hanson’s share price on May 2. Deutsche Bank AG and Royal Bank of Scotland Group Plc jointly underwrote a loan facility to enable the purchase.

The acquisition enables the firm to further target the U.S. market, despite a housing market slowdown. It will help increase HeidelbergCement’s output of aggregates, pipes and bricks. The company already operates 15 plants across the country under its Lehigh Cement brand, with nearly half of its overall sales coming from the North American market.

News of the takeover drove shares of Hanson up 3.3% to $21.64 in London, while HeidelbergCement shares rose 0.3% to $160.07 in Frankfurt. HeidelbergCement says the acquisition will be funded with debt, new stock and disposal of assets, including its 35% stake in French building-materials supplier Vicat SA, worth about 1.4 billion euros. Hanson's brick-making operations may also be sold. The deal’s total value, including debt, is $18.83-billion. The buyout is still subject to approval by British and European Union regulators. The transaction is expected to close in the third quarter.

Last year, HeidelbergCement reported roughly $12.19 billion in sales, while Hanson posted $8.13 billion. Heidelberg Cement employs some 46,000 workers in more than 50 countries; Hanson employs 26,000 workers in 14 countries. The purchase marks the end of a company that rose to global prominence in the 1980s when founder Lord James Hanson built a conglomerate with interests ranging from cigarettes and chemicals to housing and hot dogs. It was the last remaining major British-owned player.

The deal is indicative of the market’s consolidation, including Mexico's Cemex SA current $14.85 billion bid for Australia's Rinker Group Ltd., and Vulcan Materials Co. purchase of Florida Rock Industries Inc. for $4.6 billion in February. Since 2000, more than $90-billion has been spent on takeovers and agreed deals in the building-materials industry as companies seek to bolster revenue, build raw-material stockpiles and reduce costs. In 2001, Paris-based Lafarge bought Britain's Blue Circle Industries PLC for 4.5 billion pounds. That was followed by Cemex buying RMC Group PLC for 3 billion pounds in 2004 and Switzerland's Holcim taking over Aggregate Industries PLC for 2.2 billion pounds in 2005.