Lafarge expansion to upset Dangote Cement plans?

Lafarge expansion to upset Dangote Cement plans?
11 July 2014

Lafarge Wapco’s shareholders have approved the merger between the Nigerian unit of French cement maker Lafarge, Lafarge Wapco, and its wholly-owned South African subsidiary. The consolidation of the South African unit with Nigeria’s Lafarge Wapco, Lafarge says, will help accelerate its growth on the African continent and expand its product offering in South Africa and across the region.

The merger, analysts say, is a clear signal of Lafarge’s intent to compete for a larger share of Africa’s cement market, a space Dangote Cement already dominates.

The deal is worth US$1.35bn and will see the combined entity, of which Lafarge group will own 73 per cent, renamed Lafarge Africa Plc and listed on the Nigerian bourse with a market capitalisation of around US$3bn.

The chairman of Lafarge Wapco, Olusegun Osunkeye, disclosed to shareholders that the Nigerian cement firm would pay the Lafarge group US$200m in cash and 1.4bn in new shares to buy Lafarge’s South African unit and some of its other Nigerian businesses to combine operations. The company also received shareholder approval to raise NGN100bn (US$616m) in debt or equity on domestic or international capital markets.

Lafarge wholly-owns its South African business as well as 60 per cent of Lafarge Wapco, 100 per cent of  Atlas cement company and 58.6 per cent of Ashaka Cement Plc (both Nigerian listed companies). It also jointly owns United Cement Company of Nigeria with Switzerland-based Holcim. 

Dangote Cement, owned by Africa’s richest man, Aliko Dangote, is set to expand in 13 other African countries with the deal for the roll out of cement plants across Africa expected to close in the second half of the year. The company, Nigeria’s biggest with a market capitalisation of around US$24bn, owns the largest cement plant in sub-Saharan Africa, the Obajana plant in Kogi state, Nigeria. Moreover, a further 19Mta of production, grinding and import capacity is under development for Dangote Cement across Africa, which is expected to come online by the end of 2015.

Published under Cement News