UPDATE 1-Lafarge gives up Cimpor stake to grow in Brazil

* Lafarge obtains three Brazil plants in asset swap

* Votorantim gets Cimpor stake as part of swap

* Deal makes Lafarge Brazil's No. 3 cement maker

By Guillermo Parra-Bernal

SAO PAULO, March 5 (Reuters) - France's Lafarge (LAFP.PA), the world's largest cement producer, agreed on Friday to swap a stake in Portuguese rival Cimpor (CPR.LS) for plants in Brazil, a move that will help it become the third-largest producer of the material in the South American nation.

Lafarge gave up its 17.3 percent stake in Cimpor in exchange for the three facilities, which were owned by Votorantim Cimentos, it said in a statement. Cimpor was the target of a takeover battle between Votorantim and Brazilian rivals Camargo Correa and CSN (CSNA3.SA).

In addition to the plants, Votorantim agreed to supply scrap and clinker to Lafarge, which should help boost output by about 700,000 tonnes a year, the statement said. The French giant will invest 60 million reais ($34 million) to boost capacity at five of its existing units, it said.

Demand for building materials in Latin America's largest economy is surging as the government executes a $344 billion infrastructure investment plan and the country prepares to host the 2014 soccer World Cup and the 2016 Olympics. The cement industry is growing at an average rate of 5 percent a year.

With the asset swap, Lafarge will become one of Brazil's three biggest cement producers with more than 7 million tonnes of capacity. Votorantim, with production of more than 20 million tonnes annually, controls 40 percent of Brazil's cement industry.

Both Votorantim and Camargo Correa thwarted CSN's plans to expand into cement by acquiring 61 percent of Cimpor through private agreements with shareholders including Lafarge.

The defensive move, which will allow Votorantim and Camargo to remain Brazil's largest and fourth-largest cement makers, respectively, is likely to face tough regulatory scrutiny from antitrust authorities in Brazil.

The swap helps Votorantim increase its stake in Cimpor to about 21 percent. The company has a long-term accord with Portuguese state bank Caixa Geral de Depositos to acquire a further 9.6 percent in Cimpor.

The swap will take effect in July, when Lafarge will take full control of the Cipasa, Aratu and Cocalzinho plants, the statement added.

On Feb. 19, the antitrust unit of Brazil's Justice Ministry asked the country's competition regulator, Cade, to forbid Cimpor's Brazilian unit from swapping assets with Votorantim and Camargo Correa.

The antitrust unit said in the recommendation that the Votorantim-Camargo ownership of Cimpor could hamper competition.

Shares of Cimpor rose 0.8 percent to 5.455 euros in Lisbon. Lafarge surged 3.5 percent to 52.82 euros in Paris. ($1=1.779 reais) (Additional reporting by Cesar Bianconi in Sao Paulo; Editing by Robert MacMillan and Matthew Lewis)