Lafarge and Holcim propose merger of equals

The world’s two largest construction materials producers, Lafarge and Holcim, have proposed to merge in an all-share deal. The transaction would create a € 32 billion (US$ 44 billion) per year company with earnings before interest, tax, depreciation and amortisation (EBITDA) of € 6.5 billion (US$ 8.9 billion) and a presence in 90 countries.

The deal, which has been approved by both companies’ boards and their core shareholders, is said to offer annual savings of € 1.4 billion (US$ 1.9 billion). However, it may face regulatory hurdles, particularly in Europe, where there are already various national concerns about the lack of competition in the cement and aggregates sector.

The companies acknowledged that they would have to sell businesses to make the transaction acceptable to competition authorities. A statement said, "After a strategic optimisation of the portfolio through a pro-active divestment process, in anticipation of regulatory requirements, LafargeHolcim would occupy complementary positions."

Both companies’ executives have made up-beat comments about the merger. Rolf Soiron, 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.”

Bruno Lafont, chairman and CEO of Lafarge added, “I am confident that this merger of equals provides a unique opportunity to rapidly create the most advanced platform in our industry with outstanding synergies.”

Under the merger proposal, Wolfgang Reitzle, the incoming chairman of Holcim, would chair the new entity. Mr Lafont has been lined-up as CEO, with Holcim CFO Thomas Aebischer to take on this role in LafargeHolcim. Lafarge CFO Jean-Jacques Gauthier would become chief integration officer and Holcim CEO Bernard Fontana would co-chair the integration committee.

The merger would be facilitated by Holcim making an offer to exchange all outstanding Lafarge shares for Holcim shares on a one-to-one ratio. Completion of the deal is expected in the first half of 2015, and is subject to regulatory approvals.

LafargeHolcim would have production facilities in 90 countries - 17 developed markets and 73 emerging economies – throughout Europe, Asia, Africa Australasia and the Americas. It would have a total cement capacity of 427 million tonnes – equivalent to about 15% of global demand – annual aggregates sales of some 348 million tonnes, along with 70 m³ of ready mixed concrete.