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Union of equals? Holcim cools on terms of Lafarge merger

Holcim is on eof the world's largest cement manufacturers


Cracks are widening in the proposed merger of Swiss cement manufacturer Holcim and French counterpart Lafarge, with Holcim saying that it wants to renegotiate the terms of the deal.

The statementexternal link follows weeks of rumours that Holcim shareholders, in particular the largest shareholder Thomas Schmidheiny, were unhappy with the so-called ‘merger of equals’ deal. Since the plan was first announced last April, Holcim has largely outperfomed Lafarge.

The Swiss National Bank’s decision in January to stop defending the franc has also thrown a spanner in the works. The proposed merger’s original 1:1 share exchange ratio (treating shares of each company with equal weight) has since weighed more heavily in favour of Lafarge shareholders as the franc has strengthened against the euro.

“The Holcim Board of Directors has concluded that the combination agreement can no longer be pursued in its present form, and has proposed to enter into negotiations in good faith around the exchange ratio and governance issues,” Holcim said in a press release on Monday.

“Lafarge has indicated that it refuses to renegotiate, except the exchange ratio,” it added.

Lafarge said it had received a letter from Holcim on Sunday “challenging the financial terms and governance structure of the proposed merger of equals”. But the French company appears unwilling to budge on the original negotiated terms of the merger deal.

Biggest deal of 2014

Plans to create a mega cement, concrete and aggregates company, with projected combined sales of more than CHF40 billion ($40.7 billion), are already well developed. Antitrust regulators in the United States, the European Union and India are actively reviewing the proposed deal for monopolistic risks, as the two companies are already the biggest cement producers in the world.

Irish cement company CRH has also agreed to pay €6.5 billion for assets from the two companies that they would need to divest to reach regulatory approval for the merger.

Holcim shareholders had been scheduled to vote on the deal at the Jona-based company’s annual general meeting on April 13, but the company said on Monday that had been revised and the meeting will now "only contain topics related to Holcim".

Should the deal fall through, it would make a significant dent in the total mergers and acquisitions figures for 2014 as measured by Ernst & Young Switzerland.

Valued at over CHF40 billion, the proposed Holcim-Lafarge merger is almost twice the size of the next biggest Swiss M&A deal announced last year.

In total, 604 M&A deals were put on the table in 2014 with a combined value of CHF175.8 billion. This compares to 580 deals in 2013 valued at just CHF20.8 billion, according to Ernst & Young.

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