Displaying items by tag: Merger

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.

Belarus: The president of Belarus, Alexander Lukashenko, has approved the merger of the country's cement plants into a holding company under the name Belarusian Cement Plant. It will include Krasnoselskstroymaterialy, Krichevtsementnoshifer and Belarusian Cement Plant. The holding company will mainly focus on export growth, as Belarus' cement output capacity is currently more than double the domestic demand. Belarusian cement plants manufactured 5.05Mt of cement in 2013, up by 3.1% year-on-year. Belarus exported 1.37Mt of cement in 2013, up by 36.5% year-on-year.

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."

UK: Anglo American has announced that it plans to sell its equity in its joint venture project with Lafarge UK. Anglo American plans to use the proceeds of the sale to pay off debt.

Once it owns the entire firm, Lafarge plans to sell it to help it gain approval from competition regulators for its merger with Holcim. Lafarge and Holcim need to shed around Euro5bn in assets to persuade regulators to back the merger. Lafarge and Holcim's merger is expected to be completed in the first half of 2015.

"The sale will be subject to a number of conditions, including the completion of the Lafarge / Holcim merger, the divestment of Lafarge Tarmac being accepted as a suitable remedy, and approval of this sale transaction by the necessary regulators," said Anglo American.

Europe: Lafarge and Holcim have set up a Divestment Committee following the announcement of the planned merger on 7 April 2014, with the aim of taking forward the divestment process. The Committee has drawn up a list of proposed asset disposals to anticipate potential competition authorities' requirements. The announcement represents a major part of the total assets that the two companies aim to divest.

The two companies are proposing the following disposals:

• Austria: Lafarge's Mannersdorf cement plant;

• France: Holcim's assets in metropolitan France, except for its Altkirch cement plant and aggregates and ready-mix sites in the Haut-Rhin market; Lafarge's assets on Reunion island; except for its shareholding in Ciments de Bourbon;

• Germany: Lafarge's assets;

• Hungary: Holcim's assets;

• Romania: Lafarge's assets;

• Serbia: Holcim's assets;

• UK: Lafarge Tarmac assets with the possible exception of one cement plant.

• Canada: Holcim's assets;

• Mauritius: Holcim's assets;

• The Philippines: the associated companies of Lafarge and Holcim (Lafarge Republic Inc and Holcim Philippines Inc) are exploring the combination of their businesses other than LRI's Bulacan, Norzagaray and Iligan plants, which are considered to be divested as part of such combination;

• Brazil: Holcim and Lafarge will file soon with the Brazilian regulator (CADE) and propose a comprehensive and high quality package of divestments.

The future LafargeHolcim group will have a significant and balanced industrial base in Europe, enabling it to take advantage of the European economic recovery. Both companies will continue to consider whether divestments would be necessary where there might be overlaps or depending on regulatory requirements.

The proposed divestments are subject to review and further discussions with the regulatory authorities. The divestment process will be carried out in the framework of the relevant social processes and ongoing 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.

Find out exactly which cement plants are affected by Holcim and Lafarge's proposed asset divestments in the Global Cement Directory 2014, available here.

New Zealand: Holcim New Zealand has revealed that a company shake-up will result in four management jobs in Christchurch being axed in the next few months. In addition, the wind-down of the Westport cement plant in 2016 has been confirmed, which will result in the loss of about 120 jobs. It is also considering selling part or all of its lime business.

Holcim New Zealand's managing director, Jeremy Smith, will be made redundant, with Holcim announcing that it will combine its New Zealand and Australian operations. Three other management jobs will also be axed, although the head office in Christchurch will remain open.

"Other than the four senior roles announced as being dis-established in 2015, no other changes are planned in the near future," said Smith. Commenting on the status of other staff numbers once all the plans come into play, Smith said, "That is not known and it is too early to even discuss. The changes to the business model will eventually reduce the scale and scope of the New Zealand business over the coming years and it will require a smaller corporate management operation after 2016." Holcim currently employs 420 staff in New Zealand.

Holcim announced in 2013 that it was halting cement manufacturing in New Zealand and replacing it with bulk importing of cement for the New Zealand market. As such, Holcim has gained final approvals for construction to begin on its two new import cement terminals at Timaru and Auckland. Planning work is already underway on the Timaru project, where two 30,000t cement terminals are to be built. The terminals are part of Holcim's US100m investment in its New Zealand operations.

The creation of Lafarge Africa, the clearance of the Cemex West acquisition by Holcim in Germany and the sale of Lafarge's assets in Ecuador all hint at the scale of business that LafargeHolcim will command when it comes into existence. Despite the media saturation of coverage on the merger the implications in developing markets are still worthwhile exploring, especially in Latin American and Africa.

In sub-Saharan Africa, Lafarge is merging its cement companies in Nigeria and South Africa to create Lafarge Africa. Analysts Exotix have described the move as, 'the birth of a leading player on a continental scale'. Indeed, if Lafarge wanted to grow Lafarge Africa to encompass its many other African cement producing subsidiaries it could hold at least 17 integrated cement plants (including plants in north Africa) with a cement production capacity of at least 40Mt/yr in 10 countries and infrastructure in others. That puts it head-to-head with Dangote's plans to meet 40Mt/yr by the end of 2014 through its many expansion projects. Following these two market leaders would come South African-based cement producer PPC with its expansion plans around the continent.

Meanwhile across the Atlantic in Latin America the Lafarge-Holcim merger threatens Cemex. Unlike in Africa where Lafarge has a ubiquitous but disparate presence, Lafarge and Holcim's cement assets are more evenly scattered around the Caribbean, Central and South America. In terms of cement production capacity Cemex and Lafarge-Holcim will both have around 30Mt/yr, with Cemex just in front. The next biggest cement producers in Latin America will be Votorantim (present mainly in Brazil) with just over 20Mt/yr and Cementos Argos (Columbia) with about the same. This includes some new acquisitions in the United States for the growing Columbian producer. In Ecuador Lafarge and Holcim held over 50% of the market share, hence the sale by Lafarge of its assets to Union Andina de Cementos for US$553m.

Depending on how well the merger integrates the two companies, corals the various subsidiaries and implements strategic thinking the merger could just create business as usual with little disruption to the existing order. Yet in both continents the merger has the opportunity to shake up and reinvigorate the cement markets as existing players suddenly discover serious new competition and react accordingly.

Africa has a population of 1.1bn and it had a Gross Domestic Product (GDP) of US$2320/capita in 2013. South America had a population of 359m in 2010 and a GDP of US$8929/capita. This compares to US$27,250/capita in Europe and US$54,152/capita in the US. The economic development potential for each continent is humongous. Post-merger, LafargeHolcim will be first or second in line for some of this potential in Latin America and Africa.

Nigeria/South Africa: French cement maker Lafarge intends to combine its businesses in Nigeria and South Africa. The new company Lafarge Africa, which will be 73% owned by Lafarge Group, will remain listed on the Nigerian Stock Exchange. The new company will have a cement production capacity of about 12Mt/yr in South Africa and Nigeria as well as operations in aggregates, ready-mix and fly ash. The new company will be worth more than US$3bn.

"I am proud to be part of the creation of this leading African building materials platform. It will provide access to growth in two of the largest economies on the continent. It will mean that our shareholders are invested in a larger and more geographically diverse business and it will contribute significantly to the economic growth of both our nations, " said Chairman of Lafarge WAPCO, Chief Olusegun Osunkeye.

Under the proposed terms, Lafarge Group will transfer its direct and indirect shareholdings in Lafarge South Africa Holdings (Pty) Limited (100% - representing 72.4% of underlying companies in South Africa), United Cement Company of Nigeria Limited (35%), Ashakacem plc (58.61%) and Atlas Cement Company Limited (100%) to Lafarge WAPCO. The transaction is subject to Lafarge WAPCO shareholder approvals and obtaining required regulatory and other customary authorisations. The group anticipates completion during the second half of 2014.