European Cement Mix

Things appear to be pretty slow over in "old Europe." For one thing, the big news everyone's talking about is... cement companies merging. And not just actual cement mergers. There's so little happening that analysts and newspeople are whiling away the day musing on hypothetical cement company mergers.

But beggars can't be choosers, so if that's what news there is, let's take a look at it. The big event of the last couple days has been Swiss cement concern Holcim's bid of $3.3 billion for Britain's Aggregate Industries. That bid sent Aggregate shares climbing so high that they actually exceeded Holcim's bid price, with Aggregate now valued at $3.4 billion. Clearly, the market is expecting someone to take notice of whatever it is that Holcim has seen in Aggregate and one-up Holcim's bid.

So far that hasn't happened (give it time; it's been only a day), but already, speculation -- and stock prices -- are stirring among the continent's other big cement players. Another British construction materials company, Hanson (NYSE: HAN), saw its shares rise almost 5% yesterday, while the world's biggest cement maker, France's Lafarge (NYSE: LR), rose 3%, and Ireland's CRH (Nasdaq: CRHCY) increased 2%. (Meanwhile, Lafarge's U.S. progeny, Lafarge North America (NYSE: LAF) -- left in its parent's shadow -- saw its own shares dip a few tenths of a percent.)

What are the chances that the market is calling this one right and that competition will emerge to vie with Holcim for control of Aggregate? It's hard to say for sure, but consider that back in September, Mexican cement giant Cemex (NYSE: CX) took a detour from its own quest for expansion in developing markets to cross the pond and buy Britain's RMC instead -- and Cemex paid a hefty premium to RMC's market price, to boot. So there's definitely some interest out there, and some willingness to pay high prices for European cement market share.

What's more, interest in a company tends to attract not just interest from other parties, as buyers of Aggregate stock seem to be gambling. It also inspires fear in competitors who may feel pressured to do deals of their own, just to keep up with the business-world Joneses. That's not necessarily the best reason to do a merger or acquisition, but the effect on a target company's stock price will bear little relation to the wisdom of someone else's decision to acquire it.

For more on the exciting world of pulverized rock, read:

• Cemex's Buildup
• A Rock-Solid Performance
• Coal Trash = Cold Cash
• Cemex Profits From Peso

Fool contributor Rich Smith has no position in any of the companies mentioned in this article.