Displaying items by tag: LafargeHolcim
LafargeHolcim asked to divest assets in eastern India by CCI
23 February 2015India: The Competition Commission of India (CCI) has requested that LafargeHolcim divest some of its units, including limestone reserves, to prevent a monopoly in eastern India.
When Lafarge and Holcim initially announced their intention to merge operations in April 2014, they proposed a series of asset divestments in countries where they had a significant market share, but India was not among them.
After prima facie investigations by the CCI revealed that the combination would likely have an appreciable adverse effect on competition, especially in eastern India, the CCI launched, what it calls, Phase II investigations. It put the merger proposal in public scrutiny under Section 29(3) of the Competition Act, 2002 and invited comments from stakeholders including competitors. The CCI has now stated that the merger proposal is fine, but certain assets must be divested in eastern India.
According to local media, the assets can be sold to a company that is not a competitor. LafargeHolcim has 30 days to respond to the CCI's suggestions.
Potential merger of Ambuja Cement, ACC and Lafarge India
19 February 2015India: Ambuja Cement, ACC and Lafarge India may merge as part of the proposed global merger of Lafarge and Holcim, according to local media. The plan is still at an early stage and LafargeHolcim have mandated investment bank Lazard to advise on the restructuring of their Indian operations. The most likely option is the merger of ACC, Ambuja and Lafarge India into one listed entity to create the largest cement company in India. The combined cement production capacity of the three subsidiaries would be some 70Mt/yr.
As part of the new restructuring proposal, LafargeHolcim may reassess Holcim's restructuring of ACC and Ambuja, which was announced in 2014 and is currently incomplete. As part of the plan, shareholders of Ambuja had approved ACC's stake acquisition from Holcim.
Cofece approves LafargeHolcim merger
16 February 2015Mexico: The National Competition Commission (Cofece) in Mexico has approved the merger between Holcim and Lafarge, as it does not see any risk to free competition in the country. Lafarge operates in Mexico via ELC Tenedora de Cementos, which it sold to Elementia on 16 December 2014.
Opportunity in Brazil?
11 February 2015Russian refractory manufacturer Magnezit Group has struck a deal this week with Vamtec to sell product in Brazil. What such a cooperation agreement will actually entail, as ever, remains vague but it is an interesting time for a cement equipment supplier to enter the market. The majority of refractories sales are to the iron and steel industries but cement and lime holds the biggest minority market. Industrial research analysts Roskill placed the cement and lime share at 13% in a recent market report.
Competitor refractory producer RHI placed Magnezit in the same Euro0.5 – 1bn revenue bracket with producers such as a Magnesita, Inerys, Krosaki and Shinagawa. Magnesita is the most relevant company out of that list because it is headquartered in Belo Horizonte in Brazil. It is a global company but some of its major mines and production sites are based in Brazil. In 2013 its revenue grew by 8% to US$937m despite static refractory sales volumes led by falling steel production. In 2013 its refractory revenues came mainly from South America. So far in 2014 it appears to have increased its refractory sales volumes, despite a declining marking in Brazil and South America as a whole, by moving into new markets.
A similar situation has been reported by RHI in the region so far in 2014 with falling steel production hitting refractory revenue. RHI originally planned to build a refractory plant in Rio de Janeiro in 2011 but this was amended in late 2012. In this environment it seems that Magnezit may be testing the market rather than planning a full-scale incursion into Brazil.
For the first half of 2014 the Sindicato Nacional Da Indústria Do Cimento (SNIC) has reported that cement sales were 34.5Mt in Brazil, a rise of 2.8% compared to the same period in 2013. Despite this modest growth, Brazilian cement producers will see this as disappointing following years of higher growth prior to 2013.
However, events may not be that gloomy in Brazil after all. The prospect of CRH's impending purchase of three cement plants and two grinding plants from Lafarge and Holcim in Brazil with a cement production capacity of 3.6Mt/yr may stir up the market. For starters CRH may audit the suppliers the new plants are using and decide whether they want to continue using them. The acquisition will add a new player to compete with the existing producers in the high producing states of Minas Gerais and Rio De Janeiro. Competition authority Conselho Administrativo de Defesa Econômica (CADE) set up the terms for what Lafarge and Holcim would have to sell in December 2014, so now that a buyer has been found the move may go smoothly. Needless to say this presents an opening for any, say, Russian-based refractory producers looking for new clients!
CRH wins the race to the LafargeHolcim gold
04 February 2015CRH has made good on its intentions. This week it stumped up Euro6.5bn to buy assets from Lafarge and Holcim in four continents. The move follows preparation since at least May 2014 when the Irish building materials group announced a divestment programme. In October 2014 it announced that it would sell its brickwork division.
CRH is finding the cash through a mix of existing cash, debt and equity placing. Interestingly, back in 2012 an Irish stockbroking analyst who was interviewed reckoned that the company could spend up to Euro3.5bn on acquisitions whilst remaining within its banking agreements. Throw in the recent sales and planned divestments and the planned acquisition from LafargeHolcim doesn't seem like too much of a stretch for CRH.
If completed, the purchase will see CRH take on 24 cement plants with a production capacity of 36Mt/yr. As a back of the envelope calculation suggests the sale price of Euro6.5bn isn't far off the occasionally used price of US$200/t for western cement production. The deal also includes aggregates, ready mixed concrete and asphalt assets.
The purchase marks a change in CRH's buying strategy both in terms of scale and distribution. Much of CRH's previous acquisitions have been minority shareholdings that make it difficult to accurately report the company's position in the cement industry. For example, in our Top 100 Report CRH was reported to have a production capacity of 6.49Mt/yr for majority shareholdings with another 19.9Mt/yr for minority shareholdings. The new cement capacity being purchased blows this away because it more than doubles CRH's total capacity and it appears to be all majority owned. CRH thinks that this will propel it to become the world's third biggest building materials manufacturer after LafargeHolcim and Saint-Gobain, leapfrogging Cemex and HeidelbergCement in the process. Strangely there is no mention of the huge Chinese players in the top five manufacturers in CRH's acquisition presentation.
CRH has avoided buying plants in southern Europe but it is relying on the slowly improving growing UK market, where CRH will pick up four plants, to balance the risk. Elsewhere in Europe, the three Holcim plants in France have been suffering from continued low construction rates in that country and the two Lafarge cement plants in Romania are unlikely to have recovered from a production fall in 2013. Outside of Europe growth has been poor in Quebec in 2013 and 2014, where CRH is buying two plants from Holcim. Both Lafarge and Holcim have also seen a slowdown in Brazil. However, the Philippines does seem like a better bet for CRH, with solid cement volumes growth seen by Lafarge in 2013 and the first three quarters of 2014.
With CRH now looking like a company that wants to produce cement rather than one that owns parts of companies that produce cement, all eyes are on the construction markets. 14 of the 24 cement plants CRH are buying are in Europe. Buying at the bottom of a sustained production slump makes sense because the asking price will be low. However, has the bottom been reached yet?
Holcim and Lafarge announce assets sale to CRH
02 February 2015World: Lafarge and Holcim have entered exclusive negotiations to sell a number of assets to Ireland's CRH for Euro6.5bn as part of their planned merger. The assets include operations in Europe, Canada, Brazil and the Philippines. The combined assets, which include Lafarge Tarmac in the UK, generated Euro5.2bn of sales in 2014, with estimated 2014 operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of Euro744m.
"The projected transaction is a key step towards the creation of LafargeHolcim and the value offered reflects the strong quality of the selected assets. With this announcement, we remain firmly on track to complete our proposed merger in the first half of 2015," said Wolfgang Reitzle, designated chairman of the Board of Directors of LafargeHolcim and Bruno Lafont, designated CEO of the future combined company.
The divestment process will be carried out in the framework of the relevant social processes and the ongoing dialogue with the employee representatives' bodies. It will be submitted to the relevant competition authorities and to the shareholders of CRH. The divestments are subject to the completion of the merger, including a successful public exchange offering and approval by Holcim's shareholders in the second quarter of 2015. The closing of the planned merger is expected in the first half of 2015.
KKR expresses interest in Lafarge Tarmac sale with CRH
26 January 2015UK: An American private equity firm, KKR, is in talks to buy a stake in one of Britain's biggest building materials companies. KKR is understood to have teamed up with CRH. Together, they will bid for Euro6bn of assets put up for sale by Holcim and Lafarge.
CRH is in a strong position to win the race for the LafargeHolcim assets, although it is likely to be hit by regional competition issues if it is successful. As a result, it is said to have held discussions with KKR about an agreement that would see the private equity firm take control of some divisions of Holcim and Lafarge to assuage regulatory concerns.
Insiders have said that KKR has shown particular interest in the British assets of LafargeHolcim, which include Lafarge Tarmac, allegedly worth Euro2.27bn.
CRH confirms interest in LafargeHolcim divestments
23 January 2015Europe: Responding to the recent press speculation, Ireland-based building materials group CRH plc has confirmed that it is in discussions with Lafarge and Holcim regarding the potential acquisition of certain assets being disposed of by Lafarge and Holcim in advance of their proposed merger.
In December 2014, The European Commission, the European Union's antitrust authority, said that it approved the proposed merger of French cement giant Lafarge SA with Swiss peer Holcim Ltd, subject to asset sales by both companies in regions where their activities overlap.
The European Commission or EC's approval of the merger was conditional upon the divestment of Lafarge's businesses in Germany, Romania and the UK. Holcim was required to divest its operations in France, Hungary, Slovakia, Spain and the Czech Republic.
What next? Expect the unexpected…
21 January 2015On 15 January 2015, the Swiss National Bank (SNB) abandoned the Euro1.20 cap on the Swiss Franc. The effects of the decision were immediate, with the value of a Franc dropping from Euro1.20 to just Euro0.99. The decision caused turmoil for currency brokers and big business in Switzerland's normally bullet-proof finance sector, with some brokers out of business by the end of the same day.
It is not hard to see why these brokers were caught out by the sudden change in the SNB's position. On 18 December 2014 Thomas Jordan, Chairman of the SNB's Governing Board, stated in no uncertain terms that, "The SNB remains committed to purchasing unlimited quantities of foreign currency to enforce the minimum exchange rate with the utmost determination." In research conducted by Bloomberg News on 9 - 14 January 2015, not one of 22 economists questioned expected the SNB to abandon the cap in 2015. That's quite an about-turn by the SNB in less than a month.
The decision to 'scrap-the-cap' shows the potential of outside influences to suddenly unseat even the most secure of businesses. Such companies include Holcim, the share-price of which went on a rollercoaster on the SIX Swiss Exchange in the immediate aftermath of the announcement. At one point on 15 January 2015 Holcim had lost 20% of its value before closing 11% down on the day. It has since recovered somewhat, although a whopping Euro3bn of its capital has been swallowed up due to the plummeting Franc.
Following the sudden changes to its circumstances, Holcim immediately reinforced its commitment to its merger with Lafarge. "Regarding a possible impact on the combination with Lafarge, what we can say is that we remain committed to the merger," said spokesman Eike-Christian Meuter. There was an almost simultaneous reciprocal statement from the French producer, also stating its commitment. No change there then.
The calmness of Holcim's statements was broadly in line with commentary from bankers, which stated that large deals were unlikely to be affected by the change. This is because Swiss firms can insure themselves against the effects of such moves. Another 'get-out of jail free card' could have been a material adverse change (MAC) clause. If in place a MAC would allow the merging parties to terminate a transaction if an external event significantly changes the outlines of the deal. It is not possible to know whether Lafarge and Holcim have such a clause due to confidentiality issues.
Despite the fundamentals of the LafargeHolcim merger appearing to be unaffected, the scrapping of the Franc cap is an excellent example of how external policy makers can have a direct and unexpected impact on the underlying conditions of the global cement industry. Another major external influence at present is the low oil price, mainly affected by the oil producing cartel OPEC. HeidelbergCement said this week that it expects the oil price fall to have a positive impact on its profit in 2015. It makes 80% of its revenue in oil-importing countries, which should see reduced transport and production costs. This will result in improved economic conditions, higher levels of construction and hence cement production. For HeidelbergCement 2015 could be a case of costs down, sales up.
That surely sounds like good news, for some stagnant 'old' developed economies at least. However, in the world of 'new normals' it is the IMF that has sounded the biggest warning this week. It dropped its 2015 global economic growth forecast from 3.8% to 3.5%. As fuel prices slump, so too has inflation. In the EU this has resulted in deflationary pressures that could yet stump the recovery. Consumers (and construction firms alike) may go from a position of not being able to afford things, to not wanting to buy them. In the longer term, this may be yet more bad news for the cement sector in established markets.
CCI to decide on LafargeHolcim merger in February 2015
20 January 2015India: The Competition Commission of India (CCI) will soon decide on the proposed merger of Lafarge and Holcim, according to CCI chairman Ashok Chawla on 19 January 2015. "The final order on the case should be out within a month," said Chawla.
The CCI is examining the merger as it raises competition concerns. In a joint filing to CCI, Lafarge and Holcim had said that they would continue to face aggressive competition from Indian cement makers such as UltraTech, Shree Cement and Jaypee at a pan-India level.
The total installed capacity of cement in India is about 350 Mt. Domestic consumption, which stood at 242Mt in 2011 - 2012, was expected to increase to 265Mt in 2012 - 2013.