Holcim and Lafarge have agreed a merger to create the world's biggest cement maker with more than $40 billion in sales and cut overcapacities and energy expenses.
Bruno Lafont, the chief executive officer of Paris-based Lafarge, will lead the merged entity, the companies said today.
Wolfgang Reitzle, who was scheduled to become chairman of Jona, Switzerland-based Holcim, will assume that same role for the enlarged business, to be called LafargeHolcim. Both boards approved the deal.
The deal, structured as an all-share merger, will lead to synergies of more than €1.4 billion and probably close in the first half of 2015, according to Holcim and Lafarge.
The companies said they will sell assets, especially in Europe, to get regulatory approval. The deal will allow the cement producers to combine some operations after the global recession eroded demand for building materials and pushed some of the industry's kilns to run at a loss. To improve returns from plants with high energy consumption, Holcim in August agreed to swap assets in Germany and the Czech Republic with Cemex SAB, the biggest cement maker in the Americas.
"The merger will be well received," Christian Arnold, an analyst at Bank Vontobel in Zurich, said by phone.
Lafarge on April 4th rose 8.9 percent in Paris, giving the company a market value of €18.4 billion while Holcim gained 6.9 per cent in Zurich, valuing the firm at 26.2 billion Swiss francs after they confirmed talks.
Holcim will start the public exchange offer with an exchange ratio of one of its shares for one Lafarge share, the companies said today. Each Lafarge shareholder tendering shares will receive an equal number of newly issued Holcim shares. The offer is subject to Holcim holding at least two thirds of the share capital and voting rights of Lafarge on a diluted basis, the companies said.
Asked whether the deal’s structure indicates that Holcim is taking over Lafarge, Lafont told journalists on a call today that the transaction is a merger of equals. He declined to elaborate.
Lafarge estimated in its 2013 annual report that last year it had a cement market share of 34 per cent in France, 40 per cent in the UK and 10 per cent in Germany and Spain. It had a market share of 12 per cent in the US and 7 per cent in Russia. Holcim didn’t provide market shares for individual markets. Holcim’s bid for Cemex’s western German plants is already being probed by the EU over concerns the deal may substantially reduce competition. Holcim employs 71,000 people in about 70 countries while Lafarge has about 65,000 workers in 64 markets.
“The most significant overlaps are in Europe,” Lafont said today. “Some countries will require special attention, namely Canada, the US, Brazil, and maybe India and China.”
The executive said that two-thirds of the planned divestments will come from Europe. “We strongly believe that those divestments will answer the requirements of the regulatory authorities,” Lafont said.
Bloomberg
