Lafarge Open to Changing Exchange Ratio in Holcim Merger (1)
2015-03-16 07:19:41.617 GMT
(Updates with Holcim statement in third paragraph.)
By Aaron Kirchfeld, Francois de Beaupuy and Jan-Henrik Förster
(Bloomberg) -- French cement company Lafarge SA said it’s
willing to consider revising the share-exchange ratio in its
planned merger with Holcim Ltd. of Switzerland though it’s not
willing to accept any other changes to the deal.
The French company received a letter from Holcim March 15
that said the Swiss cement maker doesn’t intend to pursue the
transaction under the terms agreed last July, Lafarge said in an
e-mailed statement today.
“Lafarge’s board of directors remains committed to the
project that it intends to see implemented,” the Paris-based
company said. Holcim said in a separate statement that it’s
willing to enter into negotiations in “good faith around the
exchange ratio and governance issues.”
The plans to form the world’s biggest cement maker were
announced to great fanfare in April 2014, with the heads of both
companies lauding the creation of an entity with sales of $40
billion and operations in 90 countries. Since then, Holcim has
outperformed Lafarge on everything from sales to profit,
prompting some investors in the Swiss company to call for a
bigger stake in the new entity.
Holcim has already proposed changes to the share-exchange
ratio and management as the two companies try to save the deal,
people familiar with the matter said yesterday.
New Ratio
Under the original agreement, Holcim was planning a capital
increase to create new shares and to give one of those to
Lafarge in exchange for one share of the French company. Under
the new proposal, Holcim would give 0.875 of a share in exchange
for one Lafarge share, said the people, who asked not to be
identified because negotiations are private.
Lafarge has signaled it will make a counter proposal that
would trim its weighting to 0.93 to get the deal done, the
people said. Holcim is also pushing for a change in management
including the chief executive officer of the merged company, one
of the people said. Bruno Lafont, the CEO of Lafarge, had been
picked to lead the new entity.
Representatives for the companies are scheduled to meet as
early as today as they try to reach a compromise as early as
this week, the people said. Talks are ongoing and the structure
could still change, they said, adding that both sides could also
fail to reach an agreement.
Asset Sales
Investors on both sides remain keen to see the merger go
through, and there is pressure to reach an accord before CRH Plc
investors assemble on March 19 to approve the purchase of a
large chunk of the combined business that Holcim and Lafarge
agreed to sell to comply with antitrust demands, the people
said.
CRH last month agreed to buy 6.5 billion euros ($6.8
billion) of the cement assets to grab market share. The Irish
company over a month ago raised gross proceeds of about 1.6
billion euros through a share sale to help fund the acquisition.
The euro has significantly dropped since then.
Holcim and Lafarge agreed to combine operations after the
global recession eroded demand for building materials, and as
increased competition from emerging-market rivals undermined
profits. The companies expect the combination to generate
synergies of more than 1.4 billion euros.
New leadership at the combined company is needed to ensure
those savings targets can be reached and the two companies can
work successfully together, one of the people said.
“While speculation continues to grow around a possible
change in terms we see very little chance of the merger
failing,” J&E Davy analysts said in a note earlier this month.
“We expect Holcim and Lafarge will do what it takes to conclude
the deal.”
For Related News and Information:
Lafarge Forecasts 2015 Profit Gains as Cement Markets Revive
CRH Buys Cement Assets From Holcim-Lafarge for $7.3 Billion
Holcim and Lafarge Managers Have Equal Billing in Merged Board
Holcim earnings graph: HOLN VX <Equity> FA ISBAR <GO>
Holcim enterprise value: HOLN VX <Equity> EV <GO>
Top Swiss stories: TOPS <GO>
Bloomberg Intelligence building-materials: BI BMATG <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
To contact the reporters on this story:
Aaron Kirchfeld in London at +44-20-3525-8830 or
akirchfeld@bloomberg.net;
Francois de Beaupuy in Paris at +33-1-5365-5051 or
fdebeaupuy@bloomberg.net;
Jan-Henrik Förster in Zurich at +41-44-224-4116 or
jforster20@bloomberg.net
To contact the editors responsible for this story:
Simon Thiel at +44-20-3525-2814 or
sthiel1@bloomberg.net
Andrew Noël
2015-03-16 07:19:41.617 GMT
(Updates with Holcim statement in third paragraph.)
By Aaron Kirchfeld, Francois de Beaupuy and Jan-Henrik Förster
(Bloomberg) -- French cement company Lafarge SA said it’s
willing to consider revising the share-exchange ratio in its
planned merger with Holcim Ltd. of Switzerland though it’s not
willing to accept any other changes to the deal.
The French company received a letter from Holcim March 15
that said the Swiss cement maker doesn’t intend to pursue the
transaction under the terms agreed last July, Lafarge said in an
e-mailed statement today.
“Lafarge’s board of directors remains committed to the
project that it intends to see implemented,” the Paris-based
company said. Holcim said in a separate statement that it’s
willing to enter into negotiations in “good faith around the
exchange ratio and governance issues.”
The plans to form the world’s biggest cement maker were
announced to great fanfare in April 2014, with the heads of both
companies lauding the creation of an entity with sales of $40
billion and operations in 90 countries. Since then, Holcim has
outperformed Lafarge on everything from sales to profit,
prompting some investors in the Swiss company to call for a
bigger stake in the new entity.
Holcim has already proposed changes to the share-exchange
ratio and management as the two companies try to save the deal,
people familiar with the matter said yesterday.
New Ratio
Under the original agreement, Holcim was planning a capital
increase to create new shares and to give one of those to
Lafarge in exchange for one share of the French company. Under
the new proposal, Holcim would give 0.875 of a share in exchange
for one Lafarge share, said the people, who asked not to be
identified because negotiations are private.
Lafarge has signaled it will make a counter proposal that
would trim its weighting to 0.93 to get the deal done, the
people said. Holcim is also pushing for a change in management
including the chief executive officer of the merged company, one
of the people said. Bruno Lafont, the CEO of Lafarge, had been
picked to lead the new entity.
Representatives for the companies are scheduled to meet as
early as today as they try to reach a compromise as early as
this week, the people said. Talks are ongoing and the structure
could still change, they said, adding that both sides could also
fail to reach an agreement.
Asset Sales
Investors on both sides remain keen to see the merger go
through, and there is pressure to reach an accord before CRH Plc
investors assemble on March 19 to approve the purchase of a
large chunk of the combined business that Holcim and Lafarge
agreed to sell to comply with antitrust demands, the people
said.
CRH last month agreed to buy 6.5 billion euros ($6.8
billion) of the cement assets to grab market share. The Irish
company over a month ago raised gross proceeds of about 1.6
billion euros through a share sale to help fund the acquisition.
The euro has significantly dropped since then.
Holcim and Lafarge agreed to combine operations after the
global recession eroded demand for building materials, and as
increased competition from emerging-market rivals undermined
profits. The companies expect the combination to generate
synergies of more than 1.4 billion euros.
New leadership at the combined company is needed to ensure
those savings targets can be reached and the two companies can
work successfully together, one of the people said.
“While speculation continues to grow around a possible
change in terms we see very little chance of the merger
failing,” J&E Davy analysts said in a note earlier this month.
“We expect Holcim and Lafarge will do what it takes to conclude
the deal.”
For Related News and Information:
Lafarge Forecasts 2015 Profit Gains as Cement Markets Revive
CRH Buys Cement Assets From Holcim-Lafarge for $7.3 Billion
Holcim and Lafarge Managers Have Equal Billing in Merged Board
Holcim earnings graph: HOLN VX <Equity> FA ISBAR <GO>
Holcim enterprise value: HOLN VX <Equity> EV <GO>
Top Swiss stories: TOPS <GO>
Bloomberg Intelligence building-materials: BI BMATG <GO>
Top deal news: DTOP <GO>
Real M&A columns: NI REALMNA <GO>
To contact the reporters on this story:
Aaron Kirchfeld in London at +44-20-3525-8830 or
akirchfeld@bloomberg.net;
Francois de Beaupuy in Paris at +33-1-5365-5051 or
fdebeaupuy@bloomberg.net;
Jan-Henrik Förster in Zurich at +41-44-224-4116 or
jforster20@bloomberg.net
To contact the editors responsible for this story:
Simon Thiel at +44-20-3525-2814 or
sthiel1@bloomberg.net
Andrew Noël