Cement groups Lafarge, Holcim in $50 billion-plus merger talks

Fri Apr 4, 2014 4:57pm EDT
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By Natalie Huet and Alice Baghdjian

PARIS/ZURICH (Reuters) - The world's two largest cement makers, France's Lafarge LAFP.PA and Switzerland's Holcim HOLN.VX, are in advanced talks to merge into a company with a stock market value of over $50 billion in what would be the industry's biggest ever tie-up.

The discussions, which are likely to draw close scrutiny from European competition watchdogs, are "based on principles consistent with a merger of equals", the two companies said in identical statements on Friday.

They said no agreement had yet been reached and that there was no guarantee of a deal, but there was a "strong complimentarity" and "cultural proximity" between the groups.

A merger would help Lafarge and Holcim slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector since the 2008 economic crisis.

But any deal is likely to draw scrutiny from European competition watchdogs, as a Lafarge-Holcim entity would have a dominant position in both Europe and the United States. Regulators would probably require the companies to shed cement plants and distribution facilities before approving any merger.

Such a merger would create a giant with combined sales of over $40 billion and would be Europe's biggest tie-up this year, Thomson Reuters data shows, based on the cost to acquire the target and assuming that Lafarge, with the smaller market value, is the target company.

Shares in Lafarge and Holcim jumped to four-year highs on the news, lifting the entire cement sector.

"It's good for the market," said Clairinvest fund manager Ion-Marc Valahu. "There's overcapacity and they need to consolidate their balance sheets."   Continued...

A Holcim logo is pictured in front of the cement works in Eclepens near Lausanne February 25, 2014. REUTERS/Denis Balibouse