MEXICO CITY -(Dow Jones)- Shares of Mexican cement maker Cemex CPO (CX) fell Tuesday after the Venezuelan government took over its operations in the South American country, with the two in dispute over the value of the assets.

The government of President Hugo Chavez offered Cemex $800 million for its Venezuelan assets and said Cemex was asking $1.2 billion, which it considered too high.

Several analysts noted that the offer for Cemex was relatively less than what the Chavez government agreed to pay Switzerland's Holcim (HOLN.VX) or France's Lafarge (LFRGY) for their local units.

Venezuela announced the nationalization of the cement industry in April, and planned to take at least 60% stakes in the companies.

The government agreed to pay Holcim $552 million for 85% of its unit, and pay Lafarge $267 million for 89% of its local operations.

Morgan Stanley said in a report that Venezuela's offer to Holcim was equivalent to about $224 per ton, which would make Cemex's Venezuelan operations worth about $1 billion.

But the expropriation, after Cemex failed to reach agreement on the price, will "probably weaken the company's negotiating power in reaching a reasonable valuation," Morgan Stanley added.

The investment bank said that even in a worst-case scenario, where Cemex receives nothing for its assets, the impact on the company's stock should be marginal.

"Investors probably assumed Venezuelan assets would be valued around $500 million. Thus, if Cemex receives nothing, it should only result in about 3% downside in the stock," Morgan Stanley said.

The $1.2 billion to $1.3 billion Cemex was seeking was "close to our estimated value when news first broke on the nationalization process," Morgan Stanley added.

Cemex's CPO shares trading on the Mexican stock market closed down 2.8% at 20.92 pesos ($2.06) Tuesday. The Monterrey-based company has made no comment beyond acknowledging that the government took over its facilities, attributing the information to Venezuelan state oil company Petroleos de Venezuela, or PdVSA.

Several analysts said they expect the Chavez government to negotiate further with Cemex, as it has done in the past with other companies after they were nationalized.

Cemex could also seek arbitration, a possibility the company raised in its second-quarter report.

Cemex said its subsidiaries in Spain and the Netherlands, which are investors in Cemex Venezuela, had advised the Venezuelan government they could seek arbitration under bilateral trade treaties Venezuela has with those two countries.

With three cement plants and annual capacity of 4.6 million tons, Cemex Venezuela accounts for only about 2% of Cemex's global revenue.

Any eventual proceeds from the Venezuelan nationalization would likely be earmarked for paying down debt following Cemex's $15.3 billion acquisition last year of Australian concern Rinker.

Ratings agency Standard & Poor's on Monday confirmed Cemex's 'BBB' credit rating with a negative outlook, saying the rating action reflects, among other things, "the issuer's commitment to use its operating cash flow generation and asset sales to reduce debt."

-By Anthony Harrup, Dow Jones Newswires; (5255) 5001 5727; anthony.harrup@ dowjones.com

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  08-19-08 1659ET
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