This article first appeared in The Edge Malaysia Weekly on August 30, 2021 - September 5, 2021

YTL Corp Bhd has set its sights on acquiring Republic Cement & Building Materials Inc (RCBM), the second largest cement manufacturer and distributor in the Philippines, sources familiar with the matter tell The Edge.

The Malaysian conglomerate is understood to be looking to buy into RCBM — formerly known as Lafarge Republic Inc — in what could work out to be a large acquisition, the sources say.

RCBM is wholly owned by AEV CRH Holdings Inc, whose shareholders are Philippine conglomerate Aboitiz Equity Ventures Inc (60%), and CRH, which is based in Dublin, Ireland (40%).

Asked if there is any truth to the market speculation, a YTL Corp spokesperson replied in a brief phone message, “We are always looking for suitable opportunities to invest and expand our business regionally if they meet our criteria.”

It is not clear if there are regulatory requirements for a foreign entity to have a local partner in the cement business in the Philippines.

In an email response to a query by The Edge on whether it is contemplating selling a stake in RCBM to YTL Corp, CRH said it “does not comment on speculation regarding its development activity”, while Aboitiz Equity Ventures did not respond.

The price tag for RCBM is not known, but it is worth noting that it also owns 99.72% in another cement facility, Republic Cement Mindanao Inc.

According to its website, RCBM was founded in 1955 and has six plants — Iligan, Danao, Batangas, Norzagaray, Bulacan and Danao.

Cement brands under the group include Republic, Fortune, Rapidset, Kapit-Balay, Mindanao and Wallmaster. RCBM also sells bulk cement.

AEV CRH took over RCBM in mid-September 2015 when cement giants, France’s Lafarge and Switzerland’s Holcim, sold their 88.5% stake in the Philippine company as part of a post-merger restructuring exercise.

AEV CRH forked out PHP6.66 billion (RM561.28 million) for 649.08 million shares in RCBM.

According to AEV CRH’s annual report for 2020, RCBM made an income contribution of PHP590 million (RM49.72 million) to the parent company in FY2020, a 4% decrease from the PHP612 million recorded in 2019.

It is unclear if Aboitiz Equity Ventures has the right of first refusal to acquire CRH’s 40% stake in AEV CRH, if the Ireland-based company chooses to exit.

Aboitiz Equity Ventures is a huge conglomerate with a wide range of business interests. It is in power generation via Aboitiz Power Corp, one of the largest private power producers in the Philippines; banking and finance through Union Bank of the Philippines and City Savings Bank; agriculture under Pilmico Foods Corp and Gold Coin Management Holdings Ltd; water supply and infrastructure under APO Agua Infrastructura Inc; and real estate and property development under ­AboitizLand Inc.

Also no slouch, YTL Corp had total assets of RM71.4 billion as at the end of last year. The Malaysian conglomerate is involved in infrastructure development, utilities, construction, cement manufacturing, property development, e-commerce and hotels. Outside of Malaysia, it has operations in the UK, Singapore, Indonesia, Australia, Japan, Jordan and China.

For its nine months ended March, YTL Corp posted a net profit of RM39.82 million from RM12.99 billion in revenue. For the corresponding period a year ago, it generated RM62.37 million in net profit from RM15.64 billion in turnover.

As at end-March, YTL Corp had fixed deposits of RM11.08 billion and cash and bank balances amounting to RM2.07 billion. Its short-term debt commitments were made up of bonds and borrowings of RM10.87 billion while its long-term borrowings, which also include bonds and borrowings, were pegged at RM34.96 billion.

Its retained earnings stood at RM8.6 billion and other reserves at RM985.18 million.

For the nine-month period, YTL Corp’s cement and building materials business held under YTL Cement Bhd chalked up a profit before tax of RM301.31 million from RM3.25 billion in revenue. YTL Cement Bhd operates in Singapore, Vietnam and Myanmar, apart from Malaysia.

YTL Corp came into some cash after it sold Zhejiang Hangzhou Dama Cement Co Ltd, in the Lin’an district of the Zhejiang Province in China, for RM250 million in May.

Locally, the group’s last acquisition in the sector was in mid-2019 when it acquired 51% of Malayan Cement Bhd (formerly Lafarge Malaysia Bhd) from Associated International Cement Ltd for RM1.63 billion or RM3.75 per share, triggering a general offer. All in, YTL Cement forked out RM2.45 billion for 77% of Malaysian Cement.

Since then, Malayan Cement has announced a 10% private placement to comply with shareholding spread requirements.

YTL Corp is the flagship company of the late Tan Sri Yeoh Tiong Lay, the founder of the YTL group of companies. His eldest son Tan Sri Francis Yeoh Sock Ping runs the diversified giant as executive chairman.

At Thursday’s close of 64 sen, YTL Corp had a market capitalisation of RM7.05 billion.

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