* Holcim shareholders will hold 53 pct of merged entity
* Combined group to be worth just under $60 bln
* Premium for Lafarge shareholders 4.4 pct over Thursday
* Companies expect 1.4 bln euros in annual cost savings
* Deal faces regulatory issues in 15 jurisdictions
* Managers confident on asset sales and regulatory approval
* Shares in Lafarge, Holcim up modestly by late Monday
(Adds antitrust comment from U.S.)
By Natalie Huet and Caroline Copley
PARIS/ZURICH, April 7 Holcim of
Switzerland unveiled a deal to buy France's Lafarge on
Monday to create the world's biggest cement maker, with $44
billion of annual sales, and launch asset sales worldwide to
steer it over antitrust hurdles.
The partners billed the industry's biggest ever tie-up as a
merger of equals, under which Lafarge shareholders receive one
Holcim share for every Lafarge held and Holcim investors end up
with 53 percent of the new group. The merged business will be
based in Switzerland and listed in Zurich and Paris.
As the two biggest listed companies in the sector already,
with operations in 90 countries, the pair expect to face
antitrust scrutiny in 15 jurisdictions and to sell some 5
billion euros ($6.85 billion) of assets to persuade competition
regulators to allow the creation of LafargeHolcim.
The deal will give the group a market value of close to $60
billion. It will help it slash costs, trim debt and better cope
with the soaring energy prices, tougher competition and weaker
demand that have hurt the sector since the 2008 economic crisis.
Analysts said it would bring together Holcim's strength in
marketing with Lafarge's innovative edge and could generate
substantial savings - provided that necessary asset sales, which
may take several years, do not deplete that potential too much.
"The road to merger clearance will be a long, complex and
uncertain one," said David Anderson at the Berwin Leighton
Paisner law firm.
Antitrust enforcers will take a hard look at the deal
because of a history of collusion in the cement industry, said
Herbert Hovenkamp, who teaches antitrust law at the University
of Iowa's College of Law.
Lafarge was fined by European antitrust regulators for
price-fixing in 1994 and in 2002. The European Commission opened
another investigation into several cement producers in December
2010, and Lafarge and Holcim are among companies being probed.
Some analysts believe regulators could block the merger,
although most expect the deal to go through in the end.
Two-thirds of divestments are expected to affect Western
Europe, but there are also overlapping operations in India,
China, Canada and Brazil, Lafarge Chief Executive Officer Bruno
Lafont told reporters. He is set to run the combined group.
In afternoon trade, both firms' shares were up around 0.5
percent, trimming earlier gains. At Thursday's close, before
news broke on Friday that the two were in merger talks, one
share in Holcim was worth 4.4 percent more than one in Lafarge.
Sources close to the talks, which began in earnest in
January, said the process had been complex because both
companies have shareholders with very large individual stakes,
with whom a parallel set of negotiations had to be conducted.
Core investors had backed the deal, the companies said.
The negotiations, code-named "Cities" to reflect the theme
of construction, was helped by conducive market conditions and
the fact that the companies were similar in size.
Lafarge and Holcim said they expected total annual savings
from joining forces of 1.4 billion euros over three years,
thanks to economies of scale, better operational efficiency and
lower financing costs.
EMERGING MARKET PUSH
The deal comes after both companies took on big debts in the
past decade to expand in emerging markets, where rapid
urbanisation has fed demand for building materials. The bursting
of the U.S. housing bubble and the euro zone debt crisis caused
markets to slump, however, and they both embarked on
cost-cutting drives and started shedding assets to trim debt.
A combined LafargeHolcim will be better able to fend off
growing competition from rivals in emerging markets, such as
Mexico's Cemex and China's Anhui Conch,
which last year overtook Lafarge as the world's top cement maker
by volume, although not in revenue nor market value.
"It's really an offensive deal, a reconfiguration to have a
group with a stronger presence in faster growing markets," said
one source close the merger talks.
According to Aurel BGC analysts, Lafarge and Holcim together
sold around 275 million tonnes of cement last year - nearly
three times more than their closest listed rival, Germany's
The groups complement each other geographically, company
executives said, with Lafarge stronger in Africa and Holcim
stronger in Latin America. Emerging markets will account for 60
percent of sales; no country will represent over 10 percent.
"LafargeHolcim will be present worldwide in a balanced way,"
said Lafont. He stressed that while its headquarters would be in
Switzerland, it would have roots across Europe.
"If we can't create global champions in Europe, then we're
defeated. And we can only create European champions if we manage
to go beyond traditional frontiers," Holcim Chairman Rolf Soiron
added at a joint news conference in Paris.
Lafarge and Holcim confirmed that they would sell businesses
worth 10 to 15 percent of the group's earnings before interest,
tax, depreciation and amortisation (EBITDA) to satisfy antitrust
concerns - or about 5 billion euros in total.
"We are immediately going to start discussions with the
European Commission and other competition regulators in a
constructive spirit," Lafont said, adding the group would set up
a committee specifically devoted to divestments.
The merger has been discussed with France's Socialist
government and there will be no plant closures tied to the deal,
Lafont said. The group's research centre will be in France,
Lafarge's home country, and there would be only a very limited
impact on jobs there, he stressed.
Analysts cite France, Germany, the Czech Republic, Romania,
Serbia, Canada, Morocco and the Philippines as areas where
antitrust authorities would press for the biggest disposals.
The U.S. cement market is not concentrated, so U.S.
antitrust regulators will likely review the deal's effects on
regions as small as a few counties, said Andre Barlow, an
antitrust expert with the law firm Doyle, Barlow and Mazard
Cement is a low-value, heavy product, so markets tend to be
All signs point to the likelihood that the companies and
U.S. regulators will come to an agreement on asset sales that
allows the deal to close, Barlow said.
Managers said synergies at EBITDA level were made up of 200
million euros at operational level, 340 million in purchasing,
250 million in sales and 200 million in innovation. On top of
this, the companies see 200 million euros of savings on
financial costs and 200 million for investments.
Both companies said the transaction had won the support of
core shareholders and was expected to close in the first half of
2015. They both have high-profile billionaire shareholders
-Belgium's Albert Frere, Egypt's Nassef Sawiris, Switzerland's
Thomas Schmidheiny and Georgian-born Filaret Galchev.
Frere's holding company Groupe Bruxelles Lambert,
which has a 21 percent stake, said it would support the deal and
would hold about 10 percent in the combined group after the
transaction was completed.
($1 = 0.7303 Euros)
(Additional reporting by James Regan and Andrew Callus in
Paris, Robert-Jan Bartunek and Foo Yun Chee in Brussels, Diane
Bartz in Washington, and Anjuli Davies and Sophie Sassard in
London; Editing by Will Waterman and Alastair Macdonald)