Handsome pain

6 April 2009 By Una Galani Follow @ugalani

The German cement group overpaid for UK rival Hanson at the top of the cycle. Now Heidelberg is straining under E12bn of debt. The controlling shareholder, the Merckle family, has its own debt woes. Banks may be lenient, but the family look set to lose control.

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HeidelbergCement, which is 80% controlled by Germany's Merckle family, is pursuing a restructuring plan to ease its heavy debt burden. The cement maker has a market capitalisation of E3.2bn and had E11.6bn net debt as of March 2009.

In March, Heidelberg said that it was seeking new investors to help it raise capital. Goldman Sachs and private equity firms TPG and Bain Capital are reportedly considering taking control of the group. The group has also said it welcomes sovereign wealth funds.

Heidelberg is the Merckle family's largest asset. Part of its holding is through family investment vehicle VEM Holding. VEM also owns drug maker Ratiopharm, which is up for sale. VEM recently won an extension on a bridge loan from its banks to give it time to sell assets.

Family patriarch, Adolf Merckle committed suicide in January. He was reportedly depressed after losses on a bet on Volkswagen shares and plunging markets. VEM is reported to have a debt burden of as much as E5bn.

Deutsche Bank and RBS are Heidelberg's main lending banks.

Morgan Stanley is advising Heidelberg.

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