Holcim, Lafarge agree to create cement giant - CNBC Africa

Holcim, Lafarge agree to create cement giant

Special Report

by admin 0

Cement company, Lafarge has a presence in 64 countries globally. PHOTO: Getty Images

Lafarge shareholders will receive one Holcim share for every Lafarge share held, with the combined group to be based in Switzerland and listed in Zurich and Paris, the companies said in a joint statement on Monday.

“The new group will offer higher growth and low risk, thus creating more value,” said Lafarge chief executive, Bruno Lafont, who will become CEO of LafargeHolcim.

The transaction would be the industry's biggest-ever tie-up, and would help the companies slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector since the 2008 economic crisis.

The companies added that they expected total annual savings from joining forces of 1.4 billion euros.

The deal is expected to draw scrutiny from competition watchdogs, however, with UBS analysts pointing to antitrust issues in key markets including Brazil, Canada, Ecuador, France, the UK, the United States, Morocco and the Philippines.

(READ MORE: Dangote drives innovation into Nigeria’s cement space)

“Given the number of potential issues and required remedies, we expect a lengthy approval process, possibly taking up to two years,” UBS analysts wrote.

Lafarge and Holcim confirmed on Monday that they would divest part of their portfolio worth 10-15 per cent of global earnings before interest, tax, depreciation and amortisation (EBITDA) to satisfy antitrust concerns.

They have combined EBITDA of 6.5 billion euros.

Two-thirds of the asset sales would be in Europe, Lafont said on a conference call.

The transaction, which has the support of both boards and the companies' core shareholders, is expected to close in the first half of 2015, the companies added.