Cemex 2009 Annual Report Download - page 57

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Sale of operations in Canary Islands
On December 26, 2008, CEMEX sold assets in the cement and concrete sectors in the Canary Islands through its subsidiary in Spain, including its 50% interest
in Cementos Especiales de Las Islas, S.A. (“CEISA”) to Cimpor Inversiones S.A. (“Cimpor”), a subsidiary of Cimpor Cimentos de Portugal SGPS SA, for €162
(US$227 or $3,113), of which €5 were held in escrow in a special deposit account to cover any price adjustments as guarantee of possible contingencies,
and were finally received by CEMEX during 2009 in addition to a payment for the transmitted working capital. Until the sale, CEMEX controlled CEISA
together with another stockholder (Grupo Tudela Beguin) and the financial statements were consolidated through the proportional integration method (note
3B) considering its 50% interest. CEMEX’s 2008 consolidated income statement includes the results of operations of the assets sold, calculated through the
proportional integration method for assets related to CEISA, for the twelve-month period ended on December 31, 2008. Sale of the CEISA interest and other
assets generated a net gain in 2008 of approximately $920, including the cancellation of the related goodwill for approximately $18, which was recognized
within “Other expenses, net.” The condensed combined balance sheet of the assets sold and the CEISA interest as of December 31, 2008, is as follows:
2008
Current assets $ 455
Non-current assets 1,992
Total assets 2,447
Current liabilities 303
Non-current liabilities 33
Total liabilities 336
Total net assets $ 2,111
Selected condensed combined information of income statement of the assets sold and the CEISA interest in 2008 and 2007, is as follows:
2008 2007
Sales $ 2,317 2,962
Operating income 283 529
Net income $ 371 494
Agreement to sell operations in Austria and Hungary
On July 31, 2008, CEMEX reached an agreement to sell its operations in Austria and Hungary to the European building materials group Strabag SE
(“Strabag”), for approximately €310 (US$433 or $5,949). On July 1, 2009, Strabag SE gave notice of purported rescission from the share purchase agreement
(“SPA”). In October 2009, CEMEX filed a claim before the International Arbitration Court requesting that it declare invalid the termination of the SPA by
Strabag and claiming the payment of damages caused to CEMEX (note 21C).
Sale of operations in Italy
In several transactions during 2008, CEMEX sold its cement mill operations in Italy for approximately €148 (US$210 or $2,447), generating a gain on sale
of approximately €8 (US$12 or $119), which was recognized within “Other expenses, net.”
Rinker acquisition
CEMEX acquired 100% of the shares of Rinker, an Australian producer of aggregates, cement, concrete and other construction materials, through a
public cash tender offer, which closed in July 2007. The purchase price paid for the Rinker shares, including direct acquisition costs, was approximately
US$14,245 ($155,559), excluding approximately US$1,277 ($13,943) of assumed debt. For its fiscal year ended March 31, 2007, Rinker reported consolidated
revenues of approximately US$5,300 (unaudited) of which approximately US$4,100 (unaudited) of these revenues were generated in the United States,
and approximately US$1,200 (unaudited) were generated in Australia and China. As mentioned in note 4B, in October 2009, CEMEX sold the operations in
Australia that had been acquired with the Rinker acquisition. CEMEX’s consolidated income statement in 2007 includes the results of operations of Rinker
for the six-month period ended December 31, 2007; however, the portion corresponding to the Australian operations was reclassified to “Discontinued
operations.”
The Rinker acquisition was in line with CEMEX’s strategy to invest in the construction industry value chain and increased CEMEX’s aggregates and
ready-mix concrete business investment in the United States. Rinker’s operations in the U.S. are a complement for CEMEX, increasing its presence in
the states of Florida, California, Arizona and Nevada. Rinker was also the second largest building materials company in Australia. Through the Rinker
acquisition CEMEX increased its aggregate reserves in the United States, estimated for approximately 30 years of production, where an important number
of quarries are strategically located nearby population centers. Authorized aggregate quarries are scarce in many areas of the United States considering
the nature of resources, costs and necessary approvals to establish and operate such quarries.
The preliminary goodwill assigned as of December 31, 2007 was of approximately $97,448 (US$8,924). From January 1 to June 30, 2008, CEMEX completed
the allocation of the purchase price of Rinker to the fair values of the assets acquired and liabilities assumed, and modified certain amounts determined
in the preliminary allocation, resulting in adjustments to the preliminary goodwill. The final amount of goodwill was $96,812 (US$8,866). CEMEX believes
the Rinker goodwill was mainly generated by: a) the existence of intangible assets that could not be easily separated and quantified, so they were
transferred to goodwill, such as those related to human capital, industry potential and synergies, as well as those related to Rinker’s business model; and
b) a significant portion of the value in perpetuity of the acquired business is transferred to goodwill as a result of the use, for the valuation of the specific
assets acquired, of models based on expected cash flows that are determined over an estimated useful life.
As required by the Department of Justice of the United States, pursuant to a divestiture order in connection with the Rinker acquisition, in December 2007,
CEMEX sold to Irish producer CRH plc, ready-mix concrete and aggregate plants in Arizona and Florida for approximately US$250, of which approximately
US$30 corresponded to the sale of assets from CEMEX’s pre-Rinker acquisition operations, which generated a gain in 2007 of approximately $142,
recognized within “Other expenses, net.”