SOURCE: Orascom Construction Industries

December 10, 2007 02:12 ET

Orascom Construction - OCI Announces Agreement with Lafarge

Cairo--(Marketwire - December 10, 2007) -


                                                                    NEWS RELEASE


OCI Announces Agreement with Lafarge


Cairo, Egypt - 10 December 2007:  Orascom Construction Industries ("OCI")
announces that an agreement has been signed with Lafarge S.A. ("Lafarge") for
the proposed divestment ("Divestment") of the OCI Cement Group (the "Cement
Group") for a total payment of EUR 8.8 billion (US$ 12.9 billion)1 plus the
assumption by Lafarge of US$ 2.0 billion in debt.


Highlights:

-  The Board of Directors of OCI (the "Board") intends to return approximately 
   US$ 11 billion of the proceeds of the Divestment to OCI shareholders.

-  OCI will focus on accelerating the development of its construction operations 
   and investments in infrastructure and natural gas industries.

-  An additional amount of up to US$ 2 billion will be invested to capitalize on 
   the attractive growth opportunities in these areas.

-  The Divestment crystallizes the value that has been created through the 
   significant growth of the Cement Group.

-  The Cement Group will benefit from being part of a larger and more 
   geographically diversified business that will be the leading player in the
   building materials industry.

-  OCI and Lafarge have also signed a cooperation agreement to allow both groups 
   to continue to benefit from mutual synergies in the construction of cement 
   plants.

-  As part of the transaction, NNS Holding, a family investment holding company 
   controlled by Nassef Sawiris, will subscribe for 22.5 million new shares in 
   Lafarge at a price of EUR 125 per share.

-  In addition to continuing his current role as Chief Executive Officer of OCI, 
   Nassef Sawiris will also become a member of the Lafarge board of directors 
   and will continue to chair Egyptian Cement Company as well as other key 
   Cement Group subsidiaries.


OCI Chief Executive Officer, Nassef Sawiris, commented:


"This transaction allows us to focus all of our resources on developing our
construction, infrastructure and natural gas operations which we believe
currently have unprecedented growth opportunities. It recognizes the significant
value created in our cement business and allows us to reward our shareholders
with a substantial return of cash. The Cement Group and its employees will also
benefit from being part of the leading building materials group in the world
with the financial strength and geographical diversity to continue to prosper."


1 based on an exchange rate of EUR 1 = US$ 1.4649

1. Rationale for the Divestment


The Board has increasingly recognized that the strategic objectives of the
construction and cement groups would be better served as part of separate,
focused businesses. The Board believes that the construction, infrastructure and
natural gas operations offer unprecedented opportunities for investment and
growth.  At the same time, the Cement Group operates in a consolidating industry
that will require significant investment to continue its growth profile. Given
these competing demands on capital and management resources, the Board has
concluded that OCI will deliver superior growth and value to shareholders by
focusing all its resources on developing its construction, infrastructure and
natural gas operations and divesting its cement business.


Although OCI has been highly successful in growing the Cement Group, it is still
dependent on a relatively small number of key markets. To achieve the next stage
of its development, the Board believes that it would be necessary to increase
the geographical scale of its operations and to invest in more mature downstream
markets including ready-mix and aggregates. Becoming part of the enlarged
Lafarge Group will immediately achieve these strategic objectives for the Cement
Group.


The Divestment will allow OCI to pursue the superior growth opportunities in the
construction, infrastructure and natural gas industries and to crystallize the
significant value that has been created in the Cement Group at a price that
fully reflects its leading market positions.


OCI is currently active on over 100 construction projects in more than 20
countries. It is also one of the region's largest manufacturers of fabricated
steel products and has strategic investments in natural gas industries including
stakes in a greenfield ammonia plant in Egypt, an operating urea plant in Egypt
and an ammonia/urea complex in Algeria with a combined annual production
capacity of approximately 4 million tons. OCI also invests in infrastructure
concessions where it believes it can combine the roles of contractor and
developer.  As a result, in addition to construction work, this provides the
opportunity to generate steady cash flow streams and exceptional value for
shareholders.


In construction, OCI will continue to target large, complex and demanding
industrial, commercial and infrastructure projects which by their nature have
fewer competitors and higher margins.  The Board believes that OCI is uniquely
positioned in the Middle East, Africa and in select European markets to
capitalize on a wide array of new projects. During the first nine months of
2007, OCI has already received a total of US$ 4.8 billion in new contract
awards, 85% higher than the value of awards received during the full year 2006.


OCI will also continue to seek new high return investment opportunities which
offer attractive steady cash flow streams and allow the business to leverage its
project management, project finance and execution expertise. The Divestment will
provide the group with up to US$ 2 billion in available funding for the
implementation of its growth and investment plan.


2. Transaction Summary


The transaction is conditional on the approvals by both OCI and Lafarge
shareholders, which will be sought at shareholder meetings to be held in
January. The Divestment is expected to be completed during January 2008.


Under the terms of the agreement, OCI will receive a total payment of EUR 8.8
billion (US$ 12.9 billion) and Lafarge will assume US$ 2.0 billion of debt.  The
cash payment will be received in two separate installments of EUR 6.0 billion (US$
8.8 billion) and EUR 2.8 billion (US$ 4.1 billion).  The first installment is
expected to be received in January, with the second installment expected in
March.


The Board intends to return approximately US$ 11 billion to shareholders in the
form of two extraordinary dividends. The extraordinary dividend installments are
expected to be paid during the first quarter 2008. OCI will retain the remaining
proceeds to finance new investments and expansion projects.


Under the agreement, NNS, a family holding company controlled by Nassef Sawiris,
will subscribe for 22.5 million new shares in Lafarge at an issue price of EUR 125
per share.  Following this subscription, NNS will own approximately 11.4% of the
enlarged share capital of Lafarge.  In addition, NNS will enter into a
shareholder agreement with Lafarge which, amongst other things, will give NNS
the right to appoint two nominees to the board of Lafarge.  It is intended that
Nassef Sawiris will become a member of the Lafarge board of directors.


3. Cooperation Agreement


As part of the transaction, Lafarge and OCI have agreed upon a cooperation
agreement whereby both groups can continue to benefit from mutual synergies in
connection with the construction and expansion of new and existing cement plants
in geographic areas where OCI has a competitive advantage by virtue of its
existing operational infrastructure. In addition, OCI will continue to procure
its supply of basic materials at competitive prices.


4. Information on the Cement Group


The Cement Group includes all cement, aggregates, ready-mix concrete and cement
bags manufacturing operations. It owns and operates cement plants in Egypt,
Algeria, northern Iraq, Pakistan, United Arab Emirates, Turkey and Spain which
have a combined annual gross production capacity approaching 35 million tonnes.
New investments in Nigeria, Saudi Arabia, Syria, DPRK and South Africa will
increase the annual gross cement production capacity to 45 million tonnes by
2010.


5. Information on Lafarge


Lafarge is a world leader in cement, aggregates, concrete and gypsum, operating
in over 70 countries and employing over 71,000 people.  In the year ended 31
December 2006, Lafarge reported sales of EUR 17 billion and net income of EUR1.4
billion (www.Lafarge.com).


6. Advisors


Citi is OCI's sole financial advisor on this transaction.  Shalakany and Allen &
Overy LLP are acting as legal advisors.  Hazem Hassan KPMG is acting as the
accounting and tax advisor.


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For additional information CONTACT:

OCI Investor Relations Department:


Hassan H. Badrawi

Tel : +202 2461 1039/1036

Email: hassan.badrawi@orascomci.com


Citi:


Cyrus Shabi

Tel: +44 207 986 7555


Brunswick Group LLP:


Jerome Biscay

Benoit Grange

Paris: +33 1 53 96 83 83


Richard Jacques

James Olley

London: +44 207 404 59 59


For additional information on OCI: www.orascomci.com


Orascom Construction Industries (OCI)

Nile City Towers - South Tower

2005A Corniche El Nil, Cairo, Egypt

OCI stock symbols: OCIC.CA / ORCI EY / OCICqL / ORSD


Citigroup Global Markets Limited ("Citi"), which is authorized and regulated in
the United Kingdom by the Financial Services Authority, is acting exclusively
for OCI and for no one else in connection with the Divestment and will not be
responsible to any person other than OCI for providing the protections afforded
to customers of Citi or for providing advice in relation to the matters
described in this announcement.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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