Holcim With Lafarge Said to Maintain Listings in Merger (1)
2014-04-06 13:13:48.132 GMT
(Adds Lafont appointment in third paragraph.)
By Matthew Campbell, Francois de Beaupuy and Aaron Kirchfeld
April 6 (Bloomberg) -- Holcim Ltd. and Lafarge SA, in talks
to create the world’s biggest cement maker to cut production
overcapacity and energy costs, plan to retain dual Swiss and
French stock-market listings and headquarters, according to
people familiar with the matter.
An all-share merger, creating a company with $40 billion in
sales, will likely be announced as early as tomorrow, the people
said, asking not to be identified because discussions are
private. The companies are exploring a merger of equals that
would build on their “strengths and identities,” Jona,
Switzerland-based Holcim and Paris-based Lafarge said April 4
after Bloomberg News reported the discussions.
Lafarge Chief Executive Officer Bruno Lafont will probably
be named to lead the combined company, the people said.
A deal would let the two producers cut costs by combining
operations as some of the industry’s kilns run at a loss after
the recent global recession eroded demand. To improve returns
from plants with high energy consumption, Holcim in August
agreed to swap assets in Germany and the Czech Republic with
Monterrey, Mexico-based Cemex SAB, the biggest cement maker in
the Americas.
Lafarge on Friday rose 8.9 percent in Paris, giving the
company a market value of 18.4 billion euros ($25.2 billion)
while Holcim gained 6.9 percent in Zurich, valuing the firm at
26.2 billion Swiss francs ($29.4 billion) after they confirmed
talks. Representatives for Lafarge and Holcim declined to
comment on any details of the merger beyond the company
statements.
“There is still massive oversupply in the industry,” Ian
Osburn, an analyst at Cantor Fitzgerald, said in an interview. A
deal would help Holcim and Lafarge to “cut a lot of costs and
dominate a few more markets.”
Regulatory Scrutiny
An acquisition spree before the financial crisis, including
Lafarge’s 10.2 billion-euro purchase of Orascom Cement in 2008
and Holcim’s $4.1 billion deal for Aggregate Industries in 2005,
widened the dominance of both companies.
A transaction may face scrutiny from regulators in markets
around the world, and Osburn said the companies would need to
sell assets in Europe and the U.S. The deal would face reviews
in Europe, especially in France, as well as in Spain and
Germany, he said, while regulators in Russia, Hungary and the
Czech Republic may also examine the transaction.
Lafarge estimates in its 2013 annual report that last year
it had a cement market share of 34 percent in France, 40 percent
in the U.K. and 10 percent in Germany and Spain. It had a market
share of 12 percent in the U.S. and 7 percent in Russia. Holcim
didn’t provide market shares for individual markets.
Holcim now employs 71,000 people in about 70 countries
while Lafarge has about 65,000 workers in 64 markets.
Cost Cuts
News of the discussions on Friday lifted construction and
materials shares in Europe, helping the Stoxx Europe 600 Index
rise to a six-year high. Germany’s HeidelbergCement AG, the
world’s third-largest maker of cement, rose 4.3 percent in
Frankfurt.
Holcim CEO Bernard Fontana became the first outsider to
lead Holcim when he joined the 102-year-old Swiss company in
February 2012. Drawing on his past experience of overhauling
steelmaker Aperam, the French national has embarked on a similar
cost-cutting program, using the same “Leadership Journey”
label he employed in his prior post.
At 181-year-old Lafarge, Lafont has been slashing spending,
pushing sales of higher-margin services and selling assets to
repair a credit rating that has fallen one level below
investment grade amid a slump in European construction and
rising energy prices.
Improving Demand
Lafarge’s 750 million-euro 4.75 percent notes rose as much
as 3 percent to 111 cents on the euro, based on data compiled by
Bloomberg. Moody’s Investors Service rates Lafarge Ba1 and
Holcim two levels higher at Baa2.
At least four billionaires own shares in Holcim or Lafarge,
including Egypt’s richest person, Nassef Sawiris, Belgium’s
Albert Frere, Switzerland’s fourth-richest individual, Thomas
Schmidheiny, and Georgia-born Filaret Galchev, according to data
compiled by Bloomberg.
Both companies said earlier this year that demand for their
offerings is improving amid a global economic recovery. Holcim
in February forecast improved cement shipments this year. The
same month, Lafarge reported earnings that beat analyst
estimates and also predicted rising demand.
“This is traditionally the time when you’d see M&A in
these sectors in upswings, when profits and margins are
improving,” Cantor Fitzgerald’s Osburn said.
For Related News and Information:
Holcim Turns Toxic Dolls Into Cement as Waste Boosts Profit
NSN MTKKFS6JIJZQ <GO>
Holcim balance sheet: HOLN VX <Equity> FA BS CHART <GO>
Top Stories: TOP<GO>
--With assistance from Manus Cranny and Andrew Noel in London,
Jacqueline Simmons in Paris and Jeffrey McCracken in New York.
To contact the reporters on this story:
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net;
Francois de Beaupuy in Paris at +33-1-5365-5051 or
fdebeaupuy@bloomberg.net;
Aaron Kirchfeld in London at +44-20-3525-8830 or
akirchfeld@bloomberg.net
To contact the editors responsible for this story:
Simon Thiel at +44-20-7673-2814 or
sthiel1@bloomberg.net
Aaron Kirchfeld
2014-04-06 13:13:48.132 GMT
(Adds Lafont appointment in third paragraph.)
By Matthew Campbell, Francois de Beaupuy and Aaron Kirchfeld
April 6 (Bloomberg) -- Holcim Ltd. and Lafarge SA, in talks
to create the world’s biggest cement maker to cut production
overcapacity and energy costs, plan to retain dual Swiss and
French stock-market listings and headquarters, according to
people familiar with the matter.
An all-share merger, creating a company with $40 billion in
sales, will likely be announced as early as tomorrow, the people
said, asking not to be identified because discussions are
private. The companies are exploring a merger of equals that
would build on their “strengths and identities,” Jona,
Switzerland-based Holcim and Paris-based Lafarge said April 4
after Bloomberg News reported the discussions.
Lafarge Chief Executive Officer Bruno Lafont will probably
be named to lead the combined company, the people said.
A deal would let the two producers cut costs by combining
operations as some of the industry’s kilns run at a loss after
the recent global recession eroded demand. To improve returns
from plants with high energy consumption, Holcim in August
agreed to swap assets in Germany and the Czech Republic with
Monterrey, Mexico-based Cemex SAB, the biggest cement maker in
the Americas.
Lafarge on Friday rose 8.9 percent in Paris, giving the
company a market value of 18.4 billion euros ($25.2 billion)
while Holcim gained 6.9 percent in Zurich, valuing the firm at
26.2 billion Swiss francs ($29.4 billion) after they confirmed
talks. Representatives for Lafarge and Holcim declined to
comment on any details of the merger beyond the company
statements.
“There is still massive oversupply in the industry,” Ian
Osburn, an analyst at Cantor Fitzgerald, said in an interview. A
deal would help Holcim and Lafarge to “cut a lot of costs and
dominate a few more markets.”
Regulatory Scrutiny
An acquisition spree before the financial crisis, including
Lafarge’s 10.2 billion-euro purchase of Orascom Cement in 2008
and Holcim’s $4.1 billion deal for Aggregate Industries in 2005,
widened the dominance of both companies.
A transaction may face scrutiny from regulators in markets
around the world, and Osburn said the companies would need to
sell assets in Europe and the U.S. The deal would face reviews
in Europe, especially in France, as well as in Spain and
Germany, he said, while regulators in Russia, Hungary and the
Czech Republic may also examine the transaction.
Lafarge estimates in its 2013 annual report that last year
it had a cement market share of 34 percent in France, 40 percent
in the U.K. and 10 percent in Germany and Spain. It had a market
share of 12 percent in the U.S. and 7 percent in Russia. Holcim
didn’t provide market shares for individual markets.
Holcim now employs 71,000 people in about 70 countries
while Lafarge has about 65,000 workers in 64 markets.
Cost Cuts
News of the discussions on Friday lifted construction and
materials shares in Europe, helping the Stoxx Europe 600 Index
rise to a six-year high. Germany’s HeidelbergCement AG, the
world’s third-largest maker of cement, rose 4.3 percent in
Frankfurt.
Holcim CEO Bernard Fontana became the first outsider to
lead Holcim when he joined the 102-year-old Swiss company in
February 2012. Drawing on his past experience of overhauling
steelmaker Aperam, the French national has embarked on a similar
cost-cutting program, using the same “Leadership Journey”
label he employed in his prior post.
At 181-year-old Lafarge, Lafont has been slashing spending,
pushing sales of higher-margin services and selling assets to
repair a credit rating that has fallen one level below
investment grade amid a slump in European construction and
rising energy prices.
Improving Demand
Lafarge’s 750 million-euro 4.75 percent notes rose as much
as 3 percent to 111 cents on the euro, based on data compiled by
Bloomberg. Moody’s Investors Service rates Lafarge Ba1 and
Holcim two levels higher at Baa2.
At least four billionaires own shares in Holcim or Lafarge,
including Egypt’s richest person, Nassef Sawiris, Belgium’s
Albert Frere, Switzerland’s fourth-richest individual, Thomas
Schmidheiny, and Georgia-born Filaret Galchev, according to data
compiled by Bloomberg.
Both companies said earlier this year that demand for their
offerings is improving amid a global economic recovery. Holcim
in February forecast improved cement shipments this year. The
same month, Lafarge reported earnings that beat analyst
estimates and also predicted rising demand.
“This is traditionally the time when you’d see M&A in
these sectors in upswings, when profits and margins are
improving,” Cantor Fitzgerald’s Osburn said.
For Related News and Information:
Holcim Turns Toxic Dolls Into Cement as Waste Boosts Profit
NSN MTKKFS6JIJZQ <GO>
Holcim balance sheet: HOLN VX <Equity> FA BS CHART <GO>
Top Stories: TOP<GO>
--With assistance from Manus Cranny and Andrew Noel in London,
Jacqueline Simmons in Paris and Jeffrey McCracken in New York.
To contact the reporters on this story:
Matthew Campbell in London at +44-20-3525-8684 or
mcampbell39@bloomberg.net;
Francois de Beaupuy in Paris at +33-1-5365-5051 or
fdebeaupuy@bloomberg.net;
Aaron Kirchfeld in London at +44-20-3525-8830 or
akirchfeld@bloomberg.net
To contact the editors responsible for this story:
Simon Thiel at +44-20-7673-2814 or
sthiel1@bloomberg.net
Aaron Kirchfeld