Anglo American & Lafarge UK cement tie-up

Anglo American & Lafarge UK cement tie-up
Published: 21 February 2011

Anglo American plc and Lafarge announced their agreement to combine their cement, aggregates, ready-mixed concrete, asphalt and contracting businesses in the United Kingdom, comprising Tarmac Limited and Lafarge Cement UK, Lafarge Aggregates and Concrete UK  (Lafarge UK).

The transaction will form a 50:50 joint venture and will create a leading UK construction materials company. The combined sales of these two businesses in 2010 amounted to UK£1.8bn (US$2.8bn), with combined EBITDA of UK£210m (US$323m).

Bruno Lafont, chairman and chief executive of Lafarge, said: "This new leading construction materials company, built on the strengths and proud histories of two great teams, will create more value to customers, with an enhanced and larger offer of products and services. For Lafarge, this deal is cash neutral, is accretive to Lafarge shareholders and illustrates our strong commitment to the UK market."

The joint venture will operate with its own Board of Directors led by an independent Chairman and executive management teams drawn from both businesses.

This combination is expected to deliver substantial recurring synergies of at least GBP60m (US$96m) per annum.

Completion of the Transaction is conditional upon regulatory approvals. Both Lafarge UK and Tarmac UK operations will continue to operate independently until obtaining such approvals.

The UK cement market may be stable “at a very low level in 2011,” though it will pick up in the future because of housing needs, Lafont said. Government austerity measures “tend to reassure private investors” in the medium term, even as they may have “a slightly negative impact in the short term.”

The merger will combine 156 quarries for aggregates, six cement plants and 280 fixed plants for ready-mix concrete, and create a workforce exceeding 7000 employees, with 2800 people at Lafarge’s UK operations and 4500 at Tarmac.

Anglo American’s objective remains to divest its interests in the joint venture over time, the company said. Anglo has been selling assets such as paper and sugar production in the past 10 years to focus on raw materials including iron ore and copper needed by expanding Asian economies.