Displaying items by tag: LafargeHolcim

Europe: Holcim and Lafarge are holding talks with the European Union (EU) in a bid to obtain fasterapproval of their merger plan. Holcim and Lafarge plan to iron out possible EU concerns over the merged company's market power before filing for approval of the deal, the step that starts the EU's review.

Addressing EU issues at an early stage may allow regulators to approve the deal without opening an in-depth probe, which could add about four months to the process. The companies announced a wave of divestments in July 2014 in an attempt to ward off regulatory obstacles. Planned sales are weighted toward Europe, cutting exposure of both companies to the slower-growing region. European plants earmarked for divestment include sites in Austria, France, Germany and Romania. Under the EU's merger-review process, most deals are cleared at the first hurdle.

Singapore: Lafarge and Holcim have received approval from the Competition Commission of Singapore (CCS) to merge their businesses in the country.

Holcim (Singapore) and Lafarge Cement Singapore overlap in the manufacture and supply of ready-mix concrete and grey cement. Under Singapore's Competition Act, firms are not allowed to merge if the resulting entity could lead to a substantial lessening of competition in any market. However, Lafarge and Holcim argued that they would not have substantial market power after the merger. Grey cement is also imported to Singapore by Holcim primarily for its own consumption and is supplied to third parties only to a limited extent, they said.

After a public consultation exercise, the CSS issued its decision that 'The transaction is unlikely to lead to substantial competition concerns in Singapore.' This was because the firms are not major players in Singapore, despite being major names in overseas markets. The CSS added, "There is significant localised competition in the relevant overlapping markets in Singapore."
There are also alternative suppliers that can meet any additional demand for ready-mix concrete, thereby limiting the market power of the merged companies. With a number of suppliers in the market, cooperation among firms to raise prices will be harder as well, according to the CSS.

UK/Singapore: The private equity firm CVC Capital Partners is in discussion with Singapore's Government Investment Corporation (GIC) about a combined bid for assets being sold by Holcim and Lafarge as they prepare to merge, according to Sky News. CVC is also understood to be talking to other state investment funds about the proposed deal.

At least two other private equity groups have been formed to bid for the divestments that Holcim and Lafarge are preparing to sell. Blackstone has teamed up with Cinven and the Canada Pension Plan Investment Board. BC Partners and Advent International are also preparing a joint bid. Initial offers are understood to be due in September 2014.

Brazil: Lafarge and Holcim have announced further details on their proposal for comprehensive divestments in Brazil as part of their planned mega-merger to create LafargeHolcim.

As announced on 7 July 2014, and to anticipate potential competition authorities' requirements, the joint Divestment Committee has agreed to propose to Brazilian competition authority CADE a package of high-quality assets from both Holcim and Lafarge. This will include three integrated cement plants and two grinding stations that share a combined capacity of 3.6Mt/yr. Also included is one ready-mix concrete plant in the south east of the country.

These proposed divestments have been presented to CADE in the context of pre-filing negotiations and will now be subject to review and further discussion until a final decision is reached with the authority.

The divestment process will be carried out in the framework of the relevant social processes and on-going dialogue with the employee representatives' bodies and will be conducted in parallel to discussions with the competition authorities and potential buyers. The divestment process will be completed subject to the closing of the merger between Holcim and Lafarge.

A Lafarge and Holcim joint statement said that Brazil is an important market for the future LafargeHolcim Group and that the company will remain committed to the country, serving customers from a network in cement, aggregates and ready-mix concrete.

Russia: Russia's Federal Antimonopoly Service (FAS) has made a decision to extend the consideration period for Holcim's application for the right to direct the following businesses: OAO Lafarge Cement (Moscow), FIANT LLC (Moscow), Lafarge Aggregates & Concrete LLC (Republic of Karelia), Drilling and Blasting Company LLC (Republic of Karelia), Bolshoy Massiv Quarry LLC (Republic of Karelia) and Tekhnobud Klesovsky Quarry of Non-Metallic Minerals LLC (Ukraine). The right to direct the businesses would stem from Holcim's acquisition of 66% of the shares in Lafarge.

Lafarge is licensed for the production, storage and application of industrial explosive materials, being engaged in the activities provided for by Article 6 of the Federal Law on Procedures for Foreign Investments in Business Entities of Strategic Importance for the National Defense and State Security. Therefore, Lafarge qualifies as a business entity of strategic importance for the national defence and state security. Therefore, the deal applied for requires prior approval as provided for by Russia's investment law.

It has been another week of financial results from the global cement industry, with big hitters Lafarge and Holcim reporting what some might call 'concerning' numbers for the first half of the year. Both cement producers are, of course, making preparations ahead of their proposed merger, which could come to pass within 12 months, all being well. But are things well?

In the first half of 2014, Lafarge saw its earnings before interest, tax, depreciation and amortisation (EBITDA) decrease by 2%, with sales down by 5%. Lafarge noted that its shrinking size, this week highlighted by the sale of its Pakistani assets, and adverse exchange rate effects did not help matters. CEO Bruno Lafont was up-beat in asserting that North American and European markets would see improvements over the rest of 2014. Meanwhile, things are slightly better at Holcim, which reported an increased EBITDA (albeit just by 0.2%) as well as like-for-like sales that were up by 4.8% compared to the first half of 2013. However, its increased sales volumes and revenues could not prevent a fall in net income.

If one takes these results together, the first half of 2014 seems to been one of general stagnation for the future LafargeHolcim. It is important to remember that even more asset sales are inevitable, mainly from the weaker performer Lafarge. We are left to ponder how the new LafargeHolcim will perform in 12 months time.

At present, without serious improvement across all world economies, it is likely that LafargeHolcim (and other multinational producers) will continue to be on relatively shaky ground post-merger. The reality is that many of the promising markets that the company will serve are no longer rapidly-growing emerging economies, but are instead caught up in lower-than-expected growth (for example in Indonesia, India, China and Brazil), political disputes (for example in Algeria, Thailand, Eastern Ukraine and the Middle East) and other damaging events (for example the Ebola outbreak in West Africa). The global economy is certainly 'uneven,' as Holcim's CEO Bernard Fontana said in Holcim's results statement, but it also seems to be getting more uneven. Simple geographical and income groupings for countries, for example 'Far East = Profit,' are becoming increasingly out of date.

Navigating such a rapidly-changing world is, in one sense, less difficult for larger companies than smaller ones because risk can be spread over a much wider range of economies. However, larger companies are also slower to react to changes and the appropriateness of their responses may not be ideally tailored to individual markets. When LafargeHolcim comes to be, it will likely suffer also due to the inherent difficulties of merging two such large firms that may not see eye-to-eye on all issues. This will have to be done without some of its best assets and a lot of its 'run-time' will be dedicated to the merging process. In such an environment it is easier to be distracted from its main tasks: is it possible that this effect is already becoming apparent? As Lafarge and Holcim's latest results show, there is little room for deterioration in their results.

There is a key question: Is the LafargeHolcim first half EBITDA slide a sign of poor markets or related to preparations for the merger that shareholders will tolerate as they anticipate future riches? Will LafargeHolcim be profitable in the long-run?

World: Holcim and Lafarge have begun to formally notify regulators as to how they will tackle antitrust concerns, according to Holcim's CEO Bernard Fontana. The two companies have filed formal notifications, which generally include information on what the combined entity will look like and steps it will take to prevent it from abusing its size, in about two-thirds of the 15 jurisdictions that require a review of the proposed deal. Those include the US, Canada, Mexico, India and Russia, among others.

Fontana said that discussions with the European Union (EU), where the two companies have some of their greatest overlap, were at an 'advanced' stage. He added that he expects formal notification to be made in the summer of 2014. "We are on track," said Fontana, who has run Holcim since 2012. "We will do what we planned to do."

Holcim and France's Lafarge have moved quickly to satisfy regulators since unveiling their proposed transaction, which will create a cement company with combined sales of Euro31.8bn. The deal is expected to face significant challenges from competition authorities. EU antitrust chief Joaquin Almunia has already said that the deal is likely to face an extended probe by his agency.

Fontana said that the list of proposed businesses and plants it would sell in order to satisfy regulators, which it announced recently, would maintain entire businesses that function well and generate the greatest proceeds from the sale process. According to Fontana, Holcim and Lafarge have received more than 100 expressions of interest from potential buyers of the assets.

"We have had marks of interest from all kinds of prospective buyers," said Fontana. He added that potential buyers include private-equity groups and companies in the cement industry, including some from emerging markets. Holcim and Lafarge could also choose to sell some assets via initial public offerings.

Mexico: Mexico's cement producer Elementia is in talks to buy out its joint venture partner Lafarge, according to local media. Elementia has the right to buy Lafarge's 47% stake under an option described in the original terms of the partnership. Lafarge is said to be keen to avoid competing with itself in Mexico after agreeing to the US$40bn merger with Holcim, which already operates in the country.

The stake has been valued as high as US$500m. However, it is unlikely to attain that high a price because Lafarge has limited bargaining power and Elementia already has majority and management control of the joint venture. Lafarge may be forced to offer its stake at a discount to convince Elementia to buy. Lafarge and Holcim's recent proposed asset divestment list did not include the Mexican joint venture, which has a cement production capacity of 2Mt/yr.

Elementia sells cement in Mexico under the brand Cementos Fortaleza. Buying out Lafarge would bolster Elementia's position in Mexico, where cement demand is predicted to grow on the back of economic overhauls that were approved in 2013.

Kenya: Holcim is set to acquire effective control of Kenya's Bamburi Cement Company Ltd as part of the planned merger between Holcim and Lafarge. Lafarge is Bamburi's parent company. Bamburi said that the proposed combination would not effect any changes to the ownership of Bamburi and that the local outfit would remain listed on the Nairobi Securities Exchange (NSE).

"The parties do not wish to see any change to the status of Bamburi as one of Kenya's leading industrial companies listed on the NSE," said Holcim. Holcim added that maintenance of the listing on the NSE and the wide-scale investment from the Kenyan public in Bamburi's shares is a key ingredient to the success of Bamburi.

Lafarge owns 58.6% of Bamburi's total issued share capital through two subsidiaries: Fincem Holding Ltd (29.3%) and Kencem Ltd (29.3%). Kenyan institutions and individuals own an estimated 32.17% of Bamburi shares. Currently Holcim does not own any shares directly or indirectly.

Canada: Ottawa's Competition Bureau has announced that it will look into the US$40bn merger between Lafarge and Holcim, both of which have extensive operations in Canada. Competition Bureau spokeswoman Mélanie Beauchesne reportedly confirmed the news.

In Canada the regulations require that the Competition Bureau must be given advanced notice of a merger if the Canadian assets generate more than US$82m in revenues and when the assets exceed US$400m. In a joint statement earlier in July 2014 Lafarge and Holcim announced plans to sell all of Holcim's assets in Canada to address potential competition regulations in order to merge their businesses.

Lafarge has operations in Quebec, Nova Scotia, Ontario and Western Canada, while Holcim has plants mostly in Quebec and Ontario. Together, Holcim and Lafarge employ some 9000 people in Canada. The divestment of Holcim's Canadian assets will likely have no effect on industry operations, at least in the short term, according to Regan Watts, Lafarge Canada's spokesman.

"It's impossible to say what will happen exactly," said Colacem Canada's CFO, François Gervais. "We simply don't know what's going to happen. There are too many imponderables. But it's business as usual for us." Regarding Holcim's cement plant in Joliette, Quebec, he added, "Would the plant close? That would be very surprising. Will somebody buy it? Most likely. What will be the impact on the market? Well, who can say? I'm not clairvoyant."