Set in concrete?

Boral's $220 million sale of its stake in Adelaide Brighton points to more consolidation in the building materials industry.

Credit Suisse helped Boral offload its 17.6 per cent chunk of the South Australian cement maker for a 6.5 per cent discount to Adelaide Brighton's five day volume weighted average share price by way of a block sale. Institutional investors bought the 107.8 million shares for $1.95 each.

"The proceeds from the sale will be used to reduce Boral's bank debt and will improve Boral's gearing," said Boral chief Rod Pearse. The company originally bought its shares in December 2003 for $1.55 each and subsequently made an off-market offer before the ACCC intervened.

Adam Lennen led the team from Credit Suisse, advised by David Friedlander, Sarah Turner and Jessica Hudson from Mallesons Stephen Jaques, though it is not believed that Boral engaged its own legal advice in regards to the transaction. It is thought that Credit Suisse earned about $3 million from the deal.

Boral says it doesn't plan to raise any funds from the market, but there are plenty of others doing just that. Last month Adelaide Brighton engaged Credit Suisse to raise $100 million in equity capital, of which $85 million came from institutional investors. New Zealand rival Fletcher Building has meanwhile just closed its $NZ100 million share purchase plan and top-up offer today, receiving subscriptions worth $NZ177 million for the SPP and $21.7 million for the top-up.

The maximum amount of $NZ120 was taken in, bringing the total capital raised since an institutional placement offer was made last month to $NZ526 million. Goldman Sachs JBWere acted as underwriters to Fletcher's placement.

Eyes are now focussed on what is to become of Hanson Australia the local concreting business of Germany's Heidelberg Cement. The ownership of this will likely determine the balance of power in the Australian construction materials sector.

Hanson used to be Pioneer International, before Hanson plc bought it in 1999. Hanson had previously been a sprawling conglomerate built up by Lords James Hanson and Gordon White from the mid-1960s, but split into four units in 1996: Hanson plc, Imperial Tobacco, The Energy Group and Millennium Chemicals. In August 2007, at the height of the credit boom, Heidelberg Cement bought Hanson off the London Stock Exchange for £8 billion. Now parts of Hanson, along with the former Pioneer, are on the block.

Driving this sale are Heidelberg's debts and the suicide of Adolf Merckle, who headed the family that owns most of Heidelberg. Merckle, who in 2007 was estimated to be worth $US12.8 billion, faced loses on the Hanson-Heidelberg deal but eyeing a rebound made a large bet that Volkswagen shares would tank, only to see Porsche come out of the blue and send Volkswagen's shares up from €211 to €900 in 48 hours late last year. At the time of his death this January, Merkle was negotiating a bridge loan to rescue his investment company VEM Vermoegensverwaltung.

Presently, the Hanson Australia sale process begins. Civil contracting group Fulton Hogan is awaiting clearance to purchase Hanson's 50 per cent stake in Pioneer Road Services, an asphalting operation half-owned by Shell. Hanson Australia also has 240 concrete plants, 60 quarries, 1,500 trucks and three precast product factories in Sydney.

It is thought that Boral may be precluded from buying too many other bits of Hanson Australia on competition grounds and that Mexico's Cemex, which owns Readymix in Australia, will not participate due to a desire to consolidate its global balance sheet. Cemex is presently in talks with creditors to refinance $US14.5 billion in debt.

However, the other big international players, Lafarge – which owns Plasterboard – and Holcim, which owns Cement Australia, are possible contenders, along with CSR. Of course, the capital-raising efforts of Adelaide Brighton and Fletcher Building begin to appear in a greater context as Hanson goes to the block.

The situation is by no means set in stone. Or concrete for that matter.