Lafarge North America rejects buyout

Lafarge North America rejects buyout
Published: 27 March 2006

Lafarge North America (LNA) said Friday, March 23, that a committee of board members had rejected a US$3bn buyout offer from its French parent, Lafarge SA. The committee considers the bid of US$75 a share "inadequate and not in the best interests of Lafarge North America stockholders, other than Lafarge SA and its affiliates," LNA said in a statement.

The company noted that the committee unanimously recommended, on behalf of Lafarge North America, that its shareholders reject the offer and not tender their shares. The committee said the offer undervalues the Lafarge North America shares.  The rejection comes after some of the North American company’s biggest shareholders expressed concern about valuation of the deal.

Fighting the proposed offer for the North American unit are the New Jersey Statewide Building Laborers Benefit Funds and the International Brotherhood of Teamsters General Fund, along with Toronto investment house Mackenzie Financial Corp.

Regretably, Lafarge launched its bid shortly after coincidentally announcing poor trading conditions and outlook for some of its regional US markets, which sent the LNA shares into a temporary decline, and making Lafarge’s initial offer look quite attractive to some investors. However the shares have bounced back quite quickly (Lafarge North America closed Thursday at US$83.91 a share) and it looks as if Lafarge is going to have to make an offer at above the US$80 level in order to finally convince some of the big institutional shareholders to part with their stock.

However, according to a Lafarge news release: Lafarge’s all-cash offer for US$75 per share represents a 16.7 per cent premium over Lafarge North America’s closing stock price on February 3, 2006, the trading day immediately prior to the announcement of our Offer, and a 31.0 per cent premium over Lafarge North America’s average closing stock price over the three months prior to the announcement of our Offer. Lafarge continues to believe that, given Lafarge North America’s trading history and its past and current trading performance, its Offer is full and fair.