Holcim seeks renegotiation of merger deal with Lafarge
17 Mar 2015
The planned merger of two European cement giants, Holcim and Lafarge, seems to be on the verge of collapse after Holcim demanded a revision to the agreed terms of merger, including swap ratio and post-merger management.
The board of directors of Holcim Ltd on Monday concluded that the agreement cannot be pursued in its present form, and has proposed to enter into negotiations on the exchange ratio and governance issues ''in good faith''.
The board also decided not to take up the issue of merger with Lafarge at its annual meeting on 13 April, citing pendency of antitrust clearance in the US and India, pending EU approval of CRH as purchaser of the divested assets, as well as delays in the ''social process'' in France. (See - Indian regulator says cement giants Holcim-Lafarge merger to hurt competition and Holcim-Lafarge deal needs lengthy review, says EU antitrust chief)
Lafarge, however, is unwilling to renegotiate, except the exchange ratio.
Holcim and Lafarge had, on 2 February, agreed to sell their respective assets to CRH, an Irish holding company of building materials, for an enterprise value of €6.5 billion (CHF 6.8 billion) in a planned merger.
As part of the merger, Lafarge and Holcim entered into exclusive negotiations further to a binding commitment made by CRH regarding the sale of several assets.
The assets include operations of the two companies mainly in Europe, Canada, Brazil and the Philippines.
Taken together, the assets being disposed under the terms of the 15 February announcement generated estimated 2014 sales of €5.2 billion, with an estimated 2014 operating EBITDA of €744 million.
The enterprise value of €6.5 billion (CHF 6.8 billion) reflects the value of these high quality assets.
"The projected transaction is a key step towards the creation of LafargeHolcim and the value offered reflects the strong quality of the selected assets. This successful outcome demonstrates the quality of the collaborative work undertaken by Holcim and Lafarge teams. With this announcement, we remain firmly on track to complete our proposed merger in the first half of 2015", Wolfgang Reitzle, designated chairman of the board of directors of LafargeHolcim and Bruno Lafont, designated CEO of the future combined company, had commented then.
The divestment process was to be carried out in the framework of the relevant social processes and the ongoing dialogue with the employee representative bodies. These would also be submitted to the relevant competition authorities and to the shareholders of CRH.
However, the deal had also subjected the divestments to a successful public exchange offering and approval by Holcim's shareholders in the second quarter of 2015.
The planned merger, which would create the most advanced group in the industry, operating in 90 countries, with a strong balance sheet, was expected to close in the first half of 2015.
CRH, however, said it will press ahead with a shareholders' meeting on Thursday to ratify its €6.5-billion purchase of assets arising from the merger of Holcim and Lafarge, despite uncertainty over whether that €40 billion deal will go ahead.
CRH will also receive a break fee of more than €157 million if Swiss company Holcim and its French peer Lafarge, the world's two biggest building materials groups by revenue, fail to complete the merger they agreed last summer.
