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FCC to take over Portland Valderrivas.


FCC to take over Portland Valderrivas.

The Presidents of FCC and Portland Valderrivas, Mr. Marcelina Oreja and Mr. Rafael Martínez-Ynzenga, have agreed to present the project for the merger of the two companies through the takeover of Portland Valderrivas by FCC to their respective Boards of Directors, which will be meeting over the next few days.

FCC and Portland Valderrivas have formed part of the same group of companies since 1992, and since then consolidate their accounts through the global integration system. FCC is held by B-1998, S.L., which is the majority shareholder, with 57.06% of the company. B-1998, S.L. is 51% owned by Ms. Esther Koplowitz, with Vivendi Environment holding 49% of the company. After the merger, B-1998, S.L. will control FCC with no less than 52% of the company's shares.

Relevant Aspects of the Merger.

The merger of FCC and Portland Valderrivas shall be organized through the exchange of shares, according to which Portland Valderrivas' shareholders will receive six shares in FCC for every five shares in Portland Valderrivas.

This proposed exchange represents a premium of 11.7% over the exchange equation derived from the closing price of Portland Valderrivas and FCC on 15 April 2002, and of 17.3%, 20.1% and 14.9% over the exchange equation derived from the average prices over the last three, six and twelve months, respectively.

For accounting purposes, and once approved by the General Shareholders, the merger will be retroactively effective as of 1 January, 2002. The new shares shall form part of the corporate earnings from the moment in which the merger is finalized, which is foreseen for August 2002. Therefore, the first dividends which the holders of the new shares will begin to perceive will be those pertaining to the year 2002. Following the approval of the Merger Project by the respective Boards of Directors of FCC and Portland Valderrivas, the designation of an Independent Expert shall be requested from the Companies Register. Once the Independent Expert has issued his report, and after the remainder of the documentation has been prepared for the shareholders, the Shareholders' General Meeting of both companies shall be called on to approve the Merger. Both Shareholders' General Meetings are projected to be held before 30 June 2002, and the merger is foreseen for August 2002.

The Logic of the Operation.

FCC currently holds 48.22% of Portland Valderrivas, which in turn holds 58.84% of Cementos Portland and 80% of Torre Picasso. Once the proposed merger has been finalized, the current structure will be appreciably simplified through the elimination of the intermediary holding company (Portland Valderrivas). The merger equally allows FCC a larger direct economic participation in the company's cement business. In addition, the merger makes it possible to situate Torre Picasso at the same level as FCC, providing the parent company with greater flexibility in the management of the building.

As a consequence of this operation, FCC foresees a significant increase in the earnings per share ('EPS') over the next few years. According to company estimates, the increase in EPS will be around 4% - 5% for the year 2002 (assuming a retroactive date of 1 January 2002 for accounting purposes), and between 6% - 7% for the year 2003.

Mr. Marcelino Oreja, President of FCC, has stated:

The merger of FCC with Portland Valderrivas has an unquestionable operative and financial logic. The operation allows for a simplification of the current holding structure and facilitates an increase in economic participation in our cement business, which we carry out through Cementos Portland. From a financial point of view, the merger allows for a significant increase in earnings per share in FCC over the next few years. For Portland Valderrivas shareholders, the merger with FCC allows them to become shareholders in a company with an important revaluation potential, as well as substantially increasing the liquidity of their shares. Likewise, the proposed exchange equation means an important premium over the one derived from the price of both shares in the preceding months.

Morgan Stanley and Salomon Schroeders Smith Barney have acted as financial advisors for FCC and Portland Valderrivas, respectively, in this operation.