Displaying items by tag: Merger
Is the Holcim takeover of Lafarge complete?
30 May 2018LafargeHolcim’s announcement this week that it is to close its headquarters in Paris is the latest sign of the tension within the world’s largest cement producer. The decision is rational for a company making savings in the aftermath of the merger of two rivals – France’s Lafarge and Switzerland’s Holcim – back in 2015. Yet, it also carries symbolic weight. Lafarge was an iconic French company that had been in operation since 1833. Its hydrated lime was used to build the Suez Canal, one of the great infrastructure projects of the 19th century.
In the lead up to the merger in 2015 the union of Lafarge and Holcim was repeatedly described as one of equals. However, the diverging share price between the two companies killed that idea on the balance sheets in early 2015. Renegotiation on the share-swap ratio between the companies followed with an exchange ratio of nine Holcim shares for 10 Lafarge shares. In the end Holcim’s shareholders ended up owning 55.6% of LafargeHolcim. Lafarge’s Bruno Lafont lost out on the top job as chief executive officer (CEO) in the frenzy but the role did go to another former Lafarge executive. The new company also retained its former corporate offices in both France and Switzerland.
Since the merger LafargeHolcim has underperformed, reporting a loss of Euro1.46bn in 2017. Former senior executives from Lafarge have become embroiled in a legal investigation looking at the company’s conduct in Syria. LafargeHolcim’s first chief executive officer Eric Olsen resigned from the company in mid-2017 following fallout from a review into the Syria affair. Both Olsen and Lafont are currently under investigation by the French police into their actions with respect to a cement plant that the company kept operational during the on-going Syrian conflict. Olsen’s replacement, Jan Jenisch, is a German national who previously ran the Swiss building chemicals manufacturer Sika.
Regrettably the closure of LafargeHolcim’s corporate office in Paris will also see the loss of 97 jobs although some of the workers in Paris will be transferred to Clamart, in the south-western suburbs of the city. Another 107 jobs will also be cut in Zurich and Holderbank in Switzerland.
One more knock at the local nature of cement companies in the very international arena they operate in doesn’t mean that much beyond bruised national pride. British readers may mourn the loss of Blue Circle or Rugby Cement but the country still has a cement industry even if it mostly owned by foreign companies. France’s industry is doing better as it recovers following the lost decade since the financial crisis in 2008.
Jump to 2018 and LafargeHolcim is being run by a German with links to Switzerland, Holcim shareholders had the advantage during the merger, its former Lafarge executives and assets are facing legal scrutiny over its conduct in Syria and Lafarge’s old headquarters in Paris are being closed. LafargeHolcim in France still retains the group’s research and development centre at Lyon and a big chunk of the local industry. Yet Holcim has held an advantage ever since the final terms of the Lafarge-Holcim merger agreement were agreed so this slow slide to Switzerland is not really a surprise. From a distance it feels very much like the Holcim acquisition of Lafarge is finally complete.
CNBM and Sinoma merger set to complete in May 2018
03 April 2018China: The merger between China National Building Material (CNBM) and China National Materials (Sinoma) is looking likely to be completed in early May 2018. The companies have issued a scheduled timeline for key events of the withdrawal of Sinoma shares and the implementation of a share exchange. This process is expected to be completed on or around 3 May 2018 with CNBM updating its business registration at the Beijing Municipal Administration of Industry and Commerce as soon as possible thereafter. The merger marks the conglomeration of the leading Chinese cement producer and equipment manufacturer.
Hurtado Vicuna Group asks minor shareholders to support merger of Cementos BSA and Cementos Polpaico
05 March 2018Chile: Hurtado Vicuna Group has asked its minor shareholders to support a merger between its subsidiaries Cementos Bicentenario (BSA) and Cementos Polpaico. Hurtado Vicuna holds a 57.1% share in Cementos Polpaico, according to the Diario Financiero newspaper. However, two of the company’s major shareholders, Volcan and Megeve, may oppose the merger. If successful the merger would create Chile’s largest cement producer. As part of its acquisition of Cementos Polpaico, Hurtado Vicuna agreed to sell some of BSA’s assets. This potentially could involve the divestment of BSA’s 26 concrete plants.
ACC and Ambuja Cements put merger plans on hold
27 February 2018India: ACC and Ambuja Cements, the two Indian subsidiaries of LafargeHolcim, have put their merger plans on hold. ACC said that its board was of the opinion that there were ‘certain constraints’ blocking its merger plans, according to the Press Trust of India. However, it added that a merger was its ‘ultimate’ objective. Ambuja Cements made a similar statement. Both companies joined Holcim in 2005, before becoming part of LafargeHolcim in 2015.
Chinese competition body approves CNBM and Sinoma merger
22 December 2017China: The Anti-monopoly Bureau of the Ministry of Commerce has approved the merger between China National Building Material (CNBM) and China National Materials (Sinoma). Shareholders approved the merger between the leading Chinese producer and the equipment manufacturer in early December 2017 following approval by the Fair Trade Commission in South Korea in November 2017.
The world’s quietest cement mega-merger
13 December 2017A member of the Global Cement LinkedIn Group commented this week on the merger between China National Building Material (CNBM) and China National Materials (Sinoma).
“Has the cement world got used to gigantic mergers or have we failed to understand how big this thing is locally, regionally and globally? It is shocking to see how little publicity and media attention is paid to this merger in comparison to the past ones. I find this to be potentially a game changer for the industry. This time, the game will be drawn from a single corner with less integration pains and much more alignment. A big wave coming…”
The comment was posted by Pavel Cech, a managing director of ResourceCo Asia based in Kuala Lumpur. This company is a waste recycling and waste management concern that specialises in alternative fuels for the cement industry. So a focus on the potentially massive drive for co-processing by the Chinese industry is understandable compared to, say, other companies in other continents. However, Cech’s point is valid: why isn’t this merger being talked about more?
CNBM is the largest cement company in the country with a reported total production capacity of around 406Mt/yr. Sinoma is a cement engineering company and the fourth largest cement producer in China with a total production capacity of approximately 112Mt/yr. The companies formally agreed to merge in September 2017 as part of a state-mandated industry consolidation. If these figures are taken at face value then the merger should increase the lead of the self-declared world’s biggest cement producer.
In non-Chinese terms this would be like HeidelbergCement merging with a major equipment manufacturer like ThyssenKrupp or FLSmidth. For these kind of companies, industry commentators and press, such as a Global Cement Magazine, would spend many column inches discussing the twists and turns of the merger as it played out. Just compare the Chinese merger to the debacle that has played out with the proposed acquisition of South Africa’s PPC by Fairfax, where seemingly every development was expounded upon both by PPC and the press.
For Global Cement’s reporting and coverage on China, problems arise from language difficulties, differences with the way Chinese media covers industry, the state-controlled aspect of many of the larger producers, issues obtaining accurate industry data and the sheer size of the sector. All of these impediments make it harder to cover the Chinese market. Add the relative insularity of the sector and it’s often easy to give the Chinese cement industry a special label, separating it out when talking about the global cement industry as a whole.
All this may be about to change as Chinese cement producers start firing up their own kilns outside of the motherland as part of the ‘One Belt, One Road’ initiative, making it easier to see what Chinese companies are doing. Except that Sinoma has already been out there in the rest of world building cement plants in many developing markets and creating competition for the Europe-based equipment manufacturers.
There has been little attention from competition bodies outside of China about the merger. The South Korean Fair Trade Commission approved the deal in November 2017 and that’s been about it. Combining a cement plant builder with a cement producer is a clear example of vertical integration in the cement industry. There is nothing necessarily anti-competitive about this but it could change the market dynamic where non-Chinese multinational and Chinese cement producers compete. If both CNBM and a rival wanted to open build a plant in the same area, then the competitor to CNBM might have less choice when it came to picking their equipment supplier. In addition, news stories such as the alleged pressure by the Chinese embassy in Sri Lanka to try and force a local development agency to choose Sinoma to build a grinding plant doesn’t instil confidence that a merged CNBM-Sinoma would play nice. Although, as today’s fine by the Colombian competition body to Cementos Argos, Cemex and Holcim for price fixing shows, non-Chinese cement producers are just as prone to malpractice.
The merger of CNBM and Sinoma is undeniably big news in the industry. Both within and outside China it is likely to have a pronounced effect. As explained above, for various reasons, the western press can’t cover China in the same way it does other countries. Once the Chinese producers start building more plants outside of China then this is likely to change significantly. Until then we’ll do our best to keep track of this and other Chinese news stories.
Shareholders approve merger of CNBM and Sinoma
06 December 2017China: China National Building Material’s (CNBM) shareholders have approved a merger agreement between the company and China National Materials (Sinoma) at an extraordinary general meeting. The two companies formerly entered into a merger agreement in September 2017. The South Korean Fair Trade Commission approved the pending merger in early November 2017.
PPC turns the tables
29 November 2017There are two significant cement producers around the world up for sale at the moment. Last week we dealt with India’s Binani Cement, which has so far attracted 15 separate bids from a number of international and domestic players. Now, we turn our attention to South Africa, where PPC remains the target of approaches by LafargeHolcim and CRH.
This week PPC rejected a partial offer from Canada’s Fairfax Holdings, which it considered neither fair nor reasonable. Like a mutual friend at a party that insists two people ‘really are perfect for each other,’ Fairfax had stipulated in its terms that PPC should merge with AfriSam to create a South African super-producer. It does not appear that this idea went down well and that particular combination now seems further away than ever.
When the news broke that it had rejected Fairfax, we thought that PPC’s stance seemed a little ‘too cool.’ However, looking just at the oversized and import-addled South African market does not give the full picture of what’s happening for PPC at the moment. It has significant and growing activities in the rest of Africa too.
Later this week PPC released its results for the first half of its 2018 fiscal year. Suddenly, its handling of the Fairfax offer made more sense. Over the six months to 30 September 2017, PPC nearly tripled its profit to US$21.1m. Crucially, sales from outside South Africa grew far more rapidly than those at home. While domestic earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 4%, EBITDA from elsewhere increased by 25%. These results bode well for a potential bidding war that now favours PPC.
Even from this greatly enhanced position, PPC was not finished with its announcements for the week. Today it revealed that it plans to build a new ‘mega-factory’ in the Western Cape. Johan Claassen, the interim chief executive of PPC, said there would probably be a formal announcement about new capacity in the Western Cape in 2018. He said that PPC had decided to conduct a feasibility study into a possible replacement for its Riebeeck plant. An Environmental Impact Assessment (EIA) is in progress and the plant is reported to be ‘semi-brownfield.’ Claassen said that the new facility would use around 25% of the current Riebeeck equipment and cost US$200/t of installed capacity.
The news of its results and announcement of the new plant represent a good PR move by PPC given the difficulties faced by the wider South African market. The new information will certainly give cause for CRH and LafargeHolcim to think again about the values of their offers, should PPC also be of the view that these also undervalue the company.
PPC rejects Fairfax offer
23 November 2017South Africa: PPC has said that its independent board would not recommend Canadian firm Fairfax Africa Investments' partial offer to shareholders, considering it neither fair nor reasonable. In September 2017 Fairfax offered to buy 22% of PPC for US$144m on the condition that PPC accepted a merger proposal with rival AfriSam.
"The Independent Expert, having considered two possible outcomes of the proposed merger, is of the opinion that the partial offer, both in the context of the proposed merger as well as on a stand-alone basis, is not fair and reasonable," said PPC in a statement.
Lafarge Africa shareholders approve merger with United Cement Company of Nigeria and Atlas Cement
15 November 2017Nigeria: The shareholders of Lafarge Africa have approved the merger with United Cement Company of Nigeria (Unicem) and Atlas Cement. Lafarge Africa chairman Bolaji Balogun said that the merger would streamline its operations and reduce its costs, according to the Nigerian Guardian newspaper. Lafarge Africa is the sole shareholder of Unicem and Atlas Cement.
Unicem operates the 5Mt/yr Mfamsoing cement plant at Calabar in Cross River State. Atlas Cement runs a 0.5Mt/yr terminal in Rivers State at the Federal Ocean Terminal in Onne. It originally supplied Ordinary Portland Cement but is now changing its market to the oil and gas sector.