What’s in a name? Well maybe quite a lot when the company in question originally formed as a ‘merger of equals.’ So the news this week that the shareholders of LafargeHolcim have agreed to change its group name to Holcim suggests quite a lot. The name will only apply to the group company name and all market brands will remain as they are. Yet something fundamental appears to have changed.
As readers may remember, the original merger arrangements between Lafarge and Holcim ran into difficulties in early 2015 when Holcim’s shareholders expressed discontent at the perceived difference in value between the two companies in 2014. The deal was saved with a move away from a proposed 1-1 share exchange ratio towards one more in the favour of the Holcim shareholders and the removal of Lafarge’s chief executive Bruno Lafont as the designated chief executive of the new entity. However, from this point onwards the nagging suspicious was that the merger was really a glacial takeover of Lafarge by Holcim. Lafont and LafargeHolcim’s first chief executive officer (CEO) Eric Olsen became embroiled in legal proceedings surrounding Lafarge’s historic conduct in Syria. Then in mid-2018 LafargeHolcim decided to close its Paris headquarters, Lafarge’s old hub. During an extraordinary general meeting in May 2015 held by Holcim it was agreed to rename Holcim Ltd as LafargeHolcim Ltd as part of the merger process. The latest decision by shareholders in 2021 has reversed this.
For consumers of building products the bit about market brands staying as they are, as LafargeHolcim changes its name, is probably more important than the corporate wrangling over whatever the faraway parent company may or may not be called. So, Holcim Argentina’s plans this week to open 1000 new branches of its Disensa retail chain by 2024 may be far more important for existing and potential customers in that country. This is an enormous number of hardware stores for just one country by most reckonings and its gives one an idea of LafargeHolcim’s ambitions in the sector. It also carries echoes of the trend of business chains taking over the previously independent convenience store sector in the food sector in other parts of the world in recent decades. The Disensa franchise already operates over 2500 stories in eight countries - Argentina, Brazil, Colombia, Costa Rica, Ecuador, Mexico, Nicaragua and El Salvador – and it holds claim to being the largest building materials network in Latin America. And they aren’t stopping with just selling building materials. One innovation announced in April 2021 was the introduction of financial services to small businesses wanting to buy building products at its stores.
LafargeHolcim isn’t saying how much its retail chains contribute to the bottom line but no doubt it’s helping in a variety of ways. During an earnings call for its fourth quarter results in 2020, for example, its chief financial officer Geraldine Picaud noted that growth in Latin America in the second half of 2020 was driven by branded product in all distribution channels, including the Disensa chain. She also added that the region had the highest margin in the group at the time. Another thing to consider is, if the rumours about LafargeHolcim preparing to sell its operations in Brazil are true, what will it do with the local Disensa chain? Divesting carbon-intensive heavy industries, such as cement production, but migrating outwards and upwards in the building materials supply chain would certainly suggest that the company is preparing for its place in a low-carbon future.
Yet with all this talk of what LafargeHolcim or Holcim wants to call itself it is interesting to note that it was under Holcim in 2005 that Disensa was turned into a franchise network in its original home of Ecuador. A similar version of this model called Binastore was expanded and launched by LafargeHolcim in 2018 for Africa and the Middle East. ‘Joe Public’ or rather ‘José Public’ may not care what LafargeHolcim is called when they are buying cement from their local Disensa store. Other hardware stories are of course available.
