Lafarge and Holcim agree cement merger

Holcim and Lafarge have confirmed today their intention to combine the two companies through a merger of equals, to create a new number one global cement major.

Billed as a ‘merger of equals’, Lafarge shareholders will receive one Holcim share for every Lafarge share held. The agreement was unanimously approved by their representative board of directors and fully supported by the core shareholders of both companies, a joint statement released today said.

The two companies said they hope to “create a global leader starting from a European base.”  The industry's biggest-ever tie-up would help the firms cope with higher energy prices and weaker demand that have hurt the sector since the financial crisis. They added that they expected total annual savings from the merger of EUR1.4bn after three years, thanks to economies of scale, better operational efficiency and lower financing costs.

Lafarge and Holcim pro forma combined sales amount to around EUR32bn and EBITDA to approximately EUR6.5bn.

Combination of the two groups would provide a presence in 90 countries and would provide a “geographical fit” given Lafarge’s strong presence in Middle East and Africa, and Holcim’s significant exposure to Latin American and Asia-Pacific markets. This will deliver highly attractive growth prospects across both high growth and developed markets.

Commenting on this announcement, Rolf Soiron, current Chairman of Holcim, said: “This proposed merger is a once in a lifetime opportunity to deliver substantially better value to customers with more innovation, a wider range of products and solutions and more sustainability and enhanced returns to shareholders.”

“LafargeHolcim will be uniquely positioned to take advantage of growth in developed markets and the world’s fastest growing economies by supplying the materials that will enable the construction industry to meet the challenges of the future.”

The new company, LafargeHolcim, will be listed on the SIX in Zurich and Euronext Paris and have a market capitalisation of more than EUR40bn. It will be based in Switzerland with a board composed of equal numbers of Lafarge and Holcim directors through a distribution of central corporate functions in France and Switzerland. The chairman of the new board would be Wolfgang Reitzle, future chairman of Holcim. Bruno Lafont, chairman and CEO, would become CEO of the new group and member of the board. Thomas Aebischer, Holcim’s CFO would become CFO of the new group. Jean-Jacques Gauthier, Lafarge’s CFO would become chief integration officer of the new group. The Executive Committee would be formed of both Lafarge and Holcim. An integration committee will prepare the integration plan, to be implemented straight after closing of the transaction. Bernard Fontana, Holcim CEO will remain in charge of Holcim until completion of the transaction. He will co-chair the integration committee.

The deal is expected to draw scrutiny from competition watchdogs, with the green light required from 15 anti regulatory authorities. Lafont underlined during a conference call  that that the process would not entail any site closures but in anticipation of regulatory requirements, Lafarge and Holcim confirmed they are expecting divestment of assets representing EUR5bn of sales. Two-thirds of the divestments are expected to be in developed markets, notably Europe, Lafont said. "We are immediately going to start discussions with the European commission and other competition regulators in a constructive spirit," he highlighted.  Post divestments, it expects 60 per cent of exposure to emerging markets. No country would account for more than around 10 per cent of combined revenues.

Completion is schedule for the first half of 2015, subject to regulatory approval.