Vassiliko issue price seen at EUR 2.72 per share

Vassiliko Cement Works (VCW)  and Cyprus Cement Company Pcl (CCC) announced that they have signed a preliminary agreement according to which VCW will acquire the cement related operations of CCC as well as CCC’s investments in Latouros Quarries, CCC Aggregates Ltd, Athinodorou Beton-Transport Ltd, Athinodorou Beton-Estates Ltd, Athinodorou Beton Ltd and ELMENI (Quarries) Ltd. The agreement also provides for the gradual reduction of CCC’s cement production in the next few years and its replacement by VCW’s planned new production line.

The Company will issue (subject to EGM approval) 18.199.794 shares to CCC at the weighted average of VCW’s closing price during the 3 months that preceded the date of the agreement (9 March 2007). This will represent 25% of the issued share capital of VCW and will also be traded on the CSE.

The deal is subject to the approval by the Commission for Protection of Competition (C.P.C) as the Cyprus cement industry is a duopoly with VCW holding around 75% market share and CCC the rest.

CCC is the second largest cement and clinker producer in Cyprus with an estimated annual cement and clinker production of 450k tons representing a market share of 25% in the local market.

According to Egnatia Financial Services estimates, the issue price of the new shares (given EGM approval) will stand at  EUR 2.72 per share, with the total consideration amounting to EUR 49.5 mln. Assuming that VCW will acquire 100% of CCC’s cement production line (excluding any other business lines), Egnatia believe that this will have an additional contribution to VCW’s revenues by CYP 16 mln (i.e. 450k tons of cement production sold at an average price of CYP 35.5 per ton). In addition, given that VCW’s cost structure is at least maintained and no additional synergies are processed then this will add  CYP 2.5 mln to the new entity’s bottom line.