Concrete strategy: Colombia's largest business gets ready to compete in global markets.

It doesn't have a Web site, but it's Colombia's largest conglomerate. It doesn't even exist as a legal entity, nor does it have a president or board of directors, but its managers' decisions affect the economy of an entire country. Grupo Empresarial Antioqueno (GEA) doesn't trade as a stock, yet the companies it controls are among the largest on the Colombia Stock Exchange. Subsidiaries of Colombia's biggest company lead in the financial, food and construction industries, all of which spent the last year consolidating at home while expanding abroad. The company's most recent takeover is a clear sign of GEA'S international ambitions: Cementos Argos, the conglomerate's construction business, paid US$257.5 million to acquire two U.S. cement plants.

"All GEA's companies are different and semi-independent," says Carlos Felipe Londono, the rector of the Antioquia Engineering School. Londono, who has conducted several studies of GEA, is nevertheless quick to point out that "the overall objectives are the same for all its companies." Unlike other conglomerates, GEA was born in the 1970s out of a defensive gesture by larger companies in Antioquia, one of Colombia's wealthiest states. At that time, business leaders and wealthy families from other regions in Colombia began showing up in Medellin to buy control of some of the companies in the region. Local businesses--today the vehicles of Colombia's business elite--decided to prepare for the battle. Their main weapon: shareholder agreements. Companies operating in businesses as different as food and insurance became economic allies and shareholding partners, thus suddenly having a say-so in one another's affairs. "GEA, when it was founded, was a small empire of 46 companies," Londono says. That defensive strategy evolved to become a powerful corporate giant.

Throughout the 1980s and 1990s, GEA built itself up as the largest business group in the country. The companies share members on one another's executive boards. Despite being a multi-headed creature, common management allows the organization to operate under a common strategy. The presidents of GEA companies have always been considered the best managers in the Colombian corporate world.

Over the last five years, the group has accelerated on its way to becoming a modern conglomerate. It cleaned house by merging subsidiaries while developing new ones. Inversiones Nacional de Chocolates was born of the merger of more than 34 companies operating in the food industry, following GEA strategy to become one of the largest food companies in Latin America. It's not as well known as its rivals, but it can go toe-to-toe with giants like Mexico's Bimbo, Brazil's Sadia and Argentina's Arcor, says its president, Carlos Enrique Piedrahita. His company is a standard bearer in Colombia's business world and has set an example for others by expanding in international markets. "We export products to 60 countries on five continents," he says.

The company knows where its business opportunities are, too. "Our priority expansion targets are the Andean countries, Central America, the Caribbean, Mexico and the United States" Piedrahita says. "Brazil and the Southern Cone are not in our immediate plans." Once consolidated, Inversiones Nacional de Chocolates will be Colombia's seventh-largest company in terms of assets under management. "GEA's future is globalization," Piedrahita says. "We began some time ago, but the rest of the main companies are also starting to look for other markets."

GEA'S strategy of merging its domestic companies before jumping off to global markets has been its modus operandi on every industrial front. Last year, Bancolombia, Colombia's largest bank, announced a merger with two other GEA financial companies, Conavi and Corfinsura. The new organization--a merger that should close before July--will control more than 22% of Colombia's total banking assets and will rank among Latin America's 15 largest banks.

Bancolombia, however, is up against some big challenges. "We're the biggest bank in Colombia, but we need to be better positioned in Latin America," says Bancolombia's president, Jorge Felipe Londono. Colombia's financial sector is suffering a five-year hangover right now as it undergoes a wave of consolidation. "We had to take command of this new phase," Londono says. For Bancolombia, already established as a domestic leader, the next step will hopefully take it head-to-head with the region's top financial institutions. "We're still studying our global expansion. We will be careful, but it's an inevitable next step," says Jaime Uribe, the bank's economic studies manager.

While Bancolombia is still testing the waters before its overseas expansion, GEA has already taken on global markets in the construction industry. Cementos Argos has been fine-tuning a plan to help itself to a big slice of the U.S. market. GEA's construction business is the fifth-largest cement producer in Latin America, controlling nearly 52% of Colombia's market and exporting 3 million tons of cement, 80% of which goes to its giant northern neighbor. That figure equals 8% of all U.S. cement imports.

Global level. Argos President Jose Alberto Velez says that the company's growth in the future will take place overseas. "We're not going to neglect the domestic market, but we're competitive at the global level and we have to fight to grow in other countries," says Velez.

At the start of 2005, Argos was just one of GEA'S eight cement assets in Colombia. In June 2005, all those companies merged. Argos kept its name and absorbed the seven other companies while building up the financial war chest it needed to embark on a buying spree all along the way. And shopping is exactly what it did. In October 2005, Argos announced plans to buy two U.S. cement companies, one of the largest overseas acquisitions ever carried out by a Colombian company.

"We're going to become the single biggest player in the Texas cement market" says V41ez. Argos spent $245 million for Southern Star, which controls 18% of the state's market, posting $300 million in yearly sales. Argos' second purchase was Concrete Express (Conex), although not as large as Southern Star definitely an asset due to its location in Savannah, Georgia, a city in the southeastern United States where Argos controls a port terminal. Conex, which operates four plants in all, cost the company $12.5 million.

While Savannah is not a global shipping giant compared with ports such as Long Beach or Miami, it does bring products to and from Atlanta, home of the busiest airport in the United States.

Cement has become a hot business, especially with economic recovery in the region. Recovering economies are often marked by rekindling construction sectors, which demand cement products.

Argos isn't the only Latin American company snapping up assets in the United States. Brazil's Votorantim Cimentos bought for $389 million two cement plants and their distribution terminals from Mexico's Cemex, a Mexican cement maker. The plants are located in Michigan and Illinois and have a combined capacity of 2 million metric tons. Even within Latin America, cement has proven to be a solid business opportunity.

Mexico's Grupo Cementos de Chihuahua bought a 46.6% stake in Sociedad Boliviana de Cemento, the largest cement company in Bolivia, for $58.2 million. The purchase was the Mexican company's first in South America.

The United States also isn't Argos' only growth market. "We want to enter other markets, especially in the Andean region," says Velez. "It's a group-wide strategy and we're very competitive. Consolidating was the first step, and now our goal is to compete on the global stage," he says.

HARD ASSETS
GEA steps up global expansion by purchasing two U.S. cement
companies.

Argos revenue in 2005 *

abroad                          58%

Colombia                        42%

concrete
products                        50%

raw
cement                          50%

Note: Table made from pie chart.

                    Southern Star          Conex

output 2005         4 million [m.sup.3]    184,000 [m.sup.3]
revenue 2005E       US$300 million         US$15 million
purchase value      US$245 million         US$12.5 million
employees           840                    52
plants              46                     4

* after purchase of Southern Star and Conex E = Estimate

SOURCE: Cementos Argos