Holcim, Lafarge Show Tortoises Can Beat Hares to EU Finish Line

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(Bloomberg) — Holcim Ltd. and Lafarge SA stalled the official European Union merger process for more than half a year. They spent the time winning over regulators.

After announcing their merger in April, the world’s biggest cement makers took until the end of October to officially notify the EU. Months of informal talks with the European Commission enabled the duo to make three successive divestment-offers to remedy competition concerns.

“If you’re clever about the merger-review procedure you can get multiple bites at the cherry,” said Alec Burnside, a lawyer with Cadwalader Wickersham & Taft LLP in Brussels.

To gain regulatory approval, the Swiss and French companies have weighted asset sales toward Europe as they combine their fast-growing Asian and African operations. The pair sought in July to preempt competition concerns with an initial selling- spree plan that was amended with further divestments as the merger was filed with the EU. To get the commission’s seal of approval today the companies then had to add a grinding station in Saint-Nazaire, France to their list of assets for sale.

“During the pre-notification discussions you can already get a relatively clear idea of how the commission sees your case” and whether the EU will want to conduct an in-depth review, said Salome Cisnal de Ugarte, a lawyer at Crowell & Moring LLP in Brussels.

First Hurdle

Under the EU’s merger-review process, most deals are cleared at the first hurdle, known as phase I. The commission can open an in-depth probe — a so-called phase II investigation — if companies haven’t allayed all competition concerns. This can prolong the process by about four months.

Commitments in a phase I review “can only be accepted where the competition problem is readily identifiable and can easily be remedied,” according to EU procedures.

Burnside said that this doesn’t necessarily mean that companies make more onerous commitments to clinch a speedy clearance.

“The balance of terror is in a way on both sides because companies don’t want to go into phase II but actually the commission doesn’t want to either,” he said. “It is a huge extra burden on resources. The commission is actually tempted to give a phase I approval if it can.”

For companies, a longer probe means that “suddenly the financial rationale for the deal might have been watered down or disappear,” said Paul McGeown, a lawyer at Wilson Sonsini Goodrich & Rosati in Brussels.

Personnel issues can also crop up. Omnicom Group Inc. and Publicis Groupe SA scuttled their $35 billion merger this year after clashing over how to run it.

“Businesses are made of human beings so either the money goes or the people go,” McGeown said.

–With assistance from Francois de Beaupuy in Paris, Patrick Winters in Zurich and Aoife White in Brussels.

To contact the reporter on this story: Gaspard Sebag in Brussels at [e-mail] To contact the editors responsible for this story: Anthony Aarons at [e-mail] Peter Chapman, Andrew Noel