Cement Mega-Firms Approve Merger, But It's Far From Set
European Cement Giants Lafarge, Holcim Envision Merger of Equals, But They Face Antitrust Hurdles
The boards of France's Lafarge SA and Switzerland's Holcim Ltd. have approved plans for a $50 billion merger that will create the world's largest construction materials company, said a person familiar with the matter.
The boards of both companies met separately on Saturday to discuss the merger and authorized it, the person said. Top Holcim executives are due in Paris on Monday when the merger is likely to be officially unveiled.
The planned tie-up could face lofty antitrust hurdles, as both Lafarge and Holcim are leading players in many markets around the world. The companies are prepared to sell assets to secure regulatory approval, said the person familiar with the matter.
If the deal is completed, the new company will be based in Switzerland and led by Lafarge Chief Executive Bruno Lafont, said the person. The company would have operating headquarters in Paris and in Switzerland.
The merger will be carried out through a Holcim public offer for Lafarge shares to be paid entirely in stock. Lafarge shareholders will be offered to swap each share they hold for a Holcim share.
All Lafarge board members approved the deal, the person said, including representatives of Belgian investment holding Groupe Bruxelles Lambert, which owns 21% in the company, and Nassef Sawiris, who represents Egypt's Sawiris family, which owns 13% in Lafarge.
Lafarge and Holcim said on Friday that they "believe that given the strong complementarity of their portfolio and the cultural proximity between the two companies, there is rationale in considering a potential merger that could deliver significant benefits to customers, employees and shareholders."
Holcim and Lafarge, the top two global cement makers, have battled both overcapacity and sluggish growth in European construction, which hasn't recovered from the debt crisis and the collapse of the Spanish housing market. They are also facing slowing building activity in some developing countries, where they have invested heavily.
By sharing facilities, the companies will be able to better coordinate production and shore up profit margins. A merger would also allow the combined company to accelerate their cost-cutting schemes, boosting profitability.
The European Commission, the European Union's executive arm and antitrust watchdog, is likely to give the deal a thorough review because of their overlapping market share, antitrust lawyers say.
The merged company would have combined sales of about $42 billion, dwarfing rivals including Germany's HeidelbergCement AG with sales of about $18 billion and Mexico's Cemex SAB with sales of about $15.2 billion.