The Portuguese Securities Market Commission (CMVM) has notified Camargo Corrêa SA (Camargo), one of the largest business conglomerates of Brazil and a prospective bidder for the Portuguese cement maker Cimentos de Portugal, SGPS SA (CIMPOR) to submit its counterbid as per rules in 10 days or withdraw its merger proposal.

Barely a month ago, one of the largest steel producers in Brazil, Companhia Siderurgica Nacional (CSN) launched an unsolicited offer for the takeover of CIMPOR for €5.75 per CIMPOR share with a total value of approximately €3.86 billion ($5.5 billion). CSN's offer was conditional on obtaining 50 per cent plus one share in the cement maker's 672 million outstanding shares. (See: Brazil's CSN bids $5.5 billion for Portugal cement maker CIMPOR)

According to CMVM regulations, a counterbid has to be at least for the same stake, and at a price of at least 2 per cent higher than the initial bid.

Lisbon-based CIMPOR is the largest Portuguese group producing cement, hydraulic lime, aggregates and concrete products. The company's total installed cement capacity is over 31 million tonnes per annum spread over 13 countries, and the turnover is around $3 billion.

CIMPOR's major shareholders include Portuguese construction major Teixeira Duarte (22.9 per cent), French cement giant Lafarge (17.3 per cent), Portuguese billionaire Manuel Fino (10.9 per cent), Banco Comercial Portugues (BCP) Pension Fund (10 per cent) and others.

Sao Paulo-based Camargo Corrêa's operations cover diversified businesses such as engineering and construction, cement, footwear, textiles, steel and real estate, with an annual turnover of over $7 billion.

Camargo operates 9 cement plans in Argentina and 7 in Brazil with a total installed capacity of 9.1 million tonnes per annum.

On last Wednesday, CIMPOR disclosed Camargo's preliminary non-binding merger proposal to the market, which offered to buy 15 to 25 per cent stake in the cement producer. Earlier this month, CIMPOR's board of directors rejected CSN's takeover bid on the grounds that it undervalued the company.

CSN said that Camargo's proposal aims to obtain control of the company under more favourable conditions than those that would be imposed on a competing offeror, which contradicts the takeover bid framework, and requested CMVM to adopt necessary measures for restoring the normal functioning of the markets.

There were some media reports on Camargo's agreement with Lafarge for the acquisition of the latter's 17 per cent stake in CIMPOR. However, on the query by CMVM, Camargo clarified that there is no agreement between the two or any other entity for the acquisition of a stake. 

Analysts are of the opinion that CSN or Camargo may offer a higher price than CSN's earlier offer of €5.75 a share, as in the bourses the stock is being traded much higher, ending at €6.37 on Friday.

CIMPOR holds around 74 per cent stake in India's Shree Digvijay Cement Company, which it acquired in 2008 from Aditya Birla Group's Grasim Industries. (See: Portuguese cement maker Cimpor acquires 73.6-per cent stake in Grasim's Shree Digvijay Cement)