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By Sophie Sassard and Anjuli Davies
LONDON, April 7 The secret project to merge
Holcim and Lafarge to create the world's
biggest cement maker was codenamed "Cities" in reference to
their fabric but it could equally have applied to the many
meetings across Europe that were needed to get to the $55
billion deal announced on Monday.
It also reflects the daunting task that the two biggest
listed companies in the sector now face in getting approvals
across an expected 15 jurisdictions for a combine which has
sales of some $44 bln from operations in 90 countries.
Holcim's chairman Rolf Soiron and Lafarge's chief executive
Bruno Lafont would not say who had first approached whom about
embarking on this journey.
"Do you remember when you met your wife for the first time,
who approached whom first?" Soiron told a joint news conference
But the two met in person for the first time in late January
in Strasbourg, "almost neutral territory, halfway between Zurich
and Paris," Soiron said.
And this was when talks really began in earnest.
"The stars really aligned," said a source familir with the
"It was a good time in the equity markets, a good point in
the cycle - appropriate relative valuations, a good strategic
fit and shareholders were happy to own a smaller slice of the
enlarged company," the source said.
Negotiations quickly accelerated after that initial meeting,
and over the next few weeks the companies, alongside key
advisers worked frantically to put the building blocks together
with meetings held in Strasbourg, Brussels, Zurich and Paris,
often at lawyers' offices.
Lafarge enlisted advisory boutique Zaoui & Co, led by
brothers Michael and Yoel Zaoui alongside Rothschild's Gregoire
Heuze, Francois Wat and Romain Nourtier. Morgan Stanley
and BNP Paribas were later brought in to seal the
Holcim's advisory team was led by Goldman Sach's FX
de Mallman, global head of consumer and retail sectors but
previously head of Goldman's Swiss investment banking team where
he cultivated a close relationship with the company.
Banks could stand to earn up to 130 million euros ($178
million) in fees according to estimates by Freeman Consulting,
which tracks bankers' fees. It calculates that on deals worth
more than $25 billion, buy-side and sell-side advisors would
each customarily earn advisory fees of 0.1 percent to 0.2
percent of the enterprise value (debt plus equity).
Lafont, who will become CEO of the new combine,
LafargeHolcim, led the talks on his side, with Soiron his
counterpart at Holcim.
Getting shareholders on board was a key element of the deal,
with four billionaire shareholders in Holcim and Lafarge, said
sources familiar with the matter.
Switzerland's Thomas Schmidheiny and Filaret Galchev from
Russia control a total of 31 percent of Holcim, while Lafarge's
two biggest shareholders are Belgian Albert Frere's holding
company Groupe Bruxelles Lambert (GBL), which has a 21 percent
stake, and Egyptian tycoon Nassef Sawiris, who has 16 percent,
according to Thomson Reuters data.
They were not involved in the negotiations but gave an early
nod that they would support the deal if it were to happen,
according to sources familiar with the matter.
"Shareholders on both sides knew each other well. It was a
bit like doing a deal among friends," said one of the sources.
Another key element of negotiations and one that could yet
see the deal fracture, was trying to work out a roster of
"The fact that the companies have already announced possible
divestments is a recognition that there could be problems. They
are managing market expectations," said Paul McGeown, a partner
at Brussels-based law firm Wilson Sonsini.
As a result the companies have already said the transaction
is not expected to close until the first half of 2015.
(Additional reporting by Natalie Huet in Paris, Foo Yun Chee in
Brussels and Arno Schuetze in Frankfurt; Editing by Greg