Gov. Bill Janklow on Christmas Eve announced a deal to sell the state-owned South Dakota Cement Plant in Rapid City to a company in Mexico.
The sale price would be $252.3 million.
Janklow called a special session of the state Legislature for Thursday, Dec. 28. He will ask lawmakers to approve the deal, which Janklow says must be completed by the end of the calendar year.
"This is the best financial win-win situation I've ever seen," the governor said.
The would-be buyer is Grupo Cementos de Chihuahua, or GCC, a publicly traded company with plants in Mexico and the United States. GCC is partly owned by Cemex, the third-largest cement producer in the world, which also is based in Mexico.
Janklow said GCC would retain the Cement Plant's South Dakota managers and workforce, and he said the company would honor the current union contract.
The Cement Plant employs 221 people.
The plant has been on the market for months. Selling it was a good idea, Janklow said, because the cement industry is undergoing major consolidations and expansions. Cemex, for example, is acquiring Southdown Inc., one of the biggest U.S. cement producers, for $2.8 billion. The market also is volatile, Janklow said, and the U.S. economy could be on the brink of a slowdown.
All those factors could hurt small producers, Janklow said. "A stand-alone plant makes no sense in today's world."
Last August, Janklow's press secretary, Bob Mercer, said the state had no plans to sell the plant. "We don't have the plant on the market for sale; we never have put it on the market for sale," Mercer said in the Aug. 19 edition of the Rapid City Journal. He was responding to rumors that a Mexican company had struck a deal to buy the plant.
Mercer did say in August that state officials had considered offers from cement companies, but he added: "There's no financial reason to sell it. It's a good source of revenue for the state."
Before the GCC deal was struck, eight cement companies signed confidentiality agreements so they could inspect the state Cement Plant and examine its books. Four of those companies submitted bids, and Janklow said the GCC offer was the best. "It's a fabulous deal for South Dakota and its people," he said.
The South Dakota Cement Plant, which opened on Dec. 7, 1924, is the only state-owned cement plant in the nation. It produces about 900,000 tons of Dacotah Cement a year. In 1998, it ranked 35th among the nation's 105 cement plants.
The plant's annual revenues are more than $50 million, and it returns about
$12 million a year to state government. The plant keeps the rest of its profits for capital improvements.
According to the 1999-2000 Legislative Manual, the plant's equipment and property are worth about $100 million.
The plant is a private, for-profit company owned by the state of South Dakota and run by an appointed board of commissioners. Commissioners get small stipends for expenses - $75 per meeting - but no salaries.
Commission Chairman David Bozeid of Sioux Falls and Cement Plant President Steve Zellmer participated in complex telephone negotiations with GCC officials in Mexico and in San Antonio, Janklow said.
GCC America Director Manuel Milan Reyes negotiated for the Mexican company.
Attorneys in several cities, including Sioux Falls and Rapid City, also participated.
The final 15-hour conference call lasted all night and into the early-morning hours of Saturday. The breakthrough in negotiations came Saturday about 4:15 a.m. CST, Janklow said. He credited Bozeid with closing the deal. "He's been a hero through all of this," the governor said.
Now the offer goes to legislators in a special session.
Many of those lawmakers will not return to Pierre in January, when the legislators elected in November take office.
Janklow admitted it was unusual and inconvenient to call a holiday session of a lame-duck Legislature, but he said GCC made the deal conditional upon acceptance by Sunday, Dec. 31.
"That's the reason this comes abruptly," he said. "We had no choice."
Janklow said he believes the Cement Plant commissioners have the legal authority to sell the plant, but he said elected officials should make the decision.
The governor also will offer a plan to the Legislature on what to do with the one-time windfall of $250 million. Janklow says it should be invested. The state could use the interest for a variety of purposes, including education.
The $250 million fund created by the sale could return $16 million to $20 million or more each year to the state treasury "forever," Janklow said.
GCC was founded in 1941 in Chihuahua, Mexico. The company has grown fast in recent years, beginning in the 1970s with the rapid growth of Ciudad Juarez, a city of maybe 1 million people directly across the border from El Paso, Texas.
Today, GCC owns cement plants in Ciudad Juarez, in nearby Samalayuca, Chihuahua, and in Tijeras, N.M., near Albuquerque.
The company also owns ready-mix concrete plants in El Paso, Las Cruces, N.M., Ruidoso, N.M., and Alamogordo, N.M.
GCC also owns cement-distribution terminals in El Paso and Albuquerque. Visit the company's Web site at www.gcc.com.
Cement Plant President Zellmer said he was notifying customers and employees that the South Dakota Cement Plant would do business as usual. The plant's name won't change and neither will the name of the product, Dacotah Cement.
But some things will change. Once the sale is final, the Cement Plant will begin to charge sales tax in South Dakota. The plant will go on the property-tax rolls in Pennington County and Rapid City.
That could change, too. The state already was considering building a new plant in Dewey in Custer County, on the rail line there. The plant here is becoming outdated, Janklow said, and the state might have closed it. GCC would buy all the Cement Plant's property, including land in Wyoming, Colorado and the property in Dewey.
But GCC will not discuss details of its plans, Janklow said, in part because of securities regulations.
Zellmer, who will stay on as president, said GCC has a good reputation in the industry.
"This is a good opportunity for us," he said. "This is a good company that is buying us."
Questions or comments? Call reporter Bill Harlan at 394-8424 or e-mail him at email@example.com.