Cement giants in key merger talks
Paris, April 5, 2014
The world's two largest cement makers, Lafarge and Holcim, are in advanced talks to merge into a company with a stock market value of more than $50 billion in what would be the industry's biggest ever tie-up.
The discussions, which are likely to draw close scrutiny from European competition watchdogs, are "based on principles consistent with a merger of equals", Paris-listed Lafarge said in a statement yesterday.
The company said no agreement had yet been reached with Switzerland's Holcim and that there was no guarantee of a deal, but said there was a "strong complementarity" and "cultural proximity" between the two.
Such a merger would be Europe's biggest tie-up this year, Thomson Reuters data shows, based on the cost to acquire the target and assuming that Lafarge, with the smaller market value, is the target company.
A deal would allow Lafarge and Holcim to slash costs, trim debt and reduce worldwide overcapacity that has weighed on the market in recent years.
But any deal is likely to draw scrutiny from European competition watchdogs, as a Lafarge-Holcim entity, with combined sales of over 30bn euros, would have a dominant position in both Europe and the US.
"I think this will be a story that develops over a year or more," said Morningstar analyst Elizabeth Collins, adding that antitrust regulators would likely require the companies to shed cement plants and distribution facilities before approving any merger.
Both companies have significant and overlapping capacity in countries such as France, Germany, Spain, Czech Republic, Romania and Serbia, she said.-Reuters