16th Mar 2015 15:47
LONDON (Alliance News) - Swiss cement giant Holcim Ltd Monday said its board had concluded that it can no longer pursue a merger with French rival Lafarge SA on the current terms of the proposed deal, and it wants talks about changing the exchange ratio and "governance issues", throwing the deal into doubt.
The news hit shares in London-listed CRH PLC, which has a separate deal to buy up assets that the two companies are selling to get the merger past antitrust-regulators. The London-listed Irish building materials company said it would press ahead with a shareholder meeting on Thursday to approve the asset purchase deal.
Anglo American PLC could also be affected as it had a deal to sell its stake in its UK joint venture with Lafarge to the French company which would then sell it on to CRH as part of its anti-trust remedy.
Lafarge responded to Holcim's announcement by saying it was committed to the deal, but would refuse to negotiate on anything but the exchange ratio.
Holcim wants a bigger share of the combined entity and also changes to the proposed management of the group, a move that's being pushed by its large shareholders after its shares and operating performance outperformed that of Lafarge since the deal was first announced in April last year, according to Bloomberg.
The share price outperformance in euro terms comes after the Swiss franc appreciated strongly against the euro. Under the original terms of the deal, the two companies' shareholders were to get an equal share of the combined group, while Lafarge Chief executive Bruno Lafont was to run it.
Holcim also said Monday that the agenda for its Annual General Meeting on April 13 would only contain topics related to Holcim, due to pending antitrust clearance for the merger in the US and India, pending EU approval of CRH as purchaser of divested assets, as well as delays in the social process in France.
In a separate statement, CRH noted the announcements by the two companies, but said its extraordinary general meeting on Thursday will go ahead to allow its shareholders to approve the acquisition of assets being offloaded by Holcim and Lafarge to get the deal through antitrust regulators.
CRH announced last month that it had agreed a deal with the pair to pay EUR6.5 billion to buy assets from the companies primarily in Europe, Canada, Brazil and the Philippines. The Irish building materials company expects the deal to boost earnings per share by about 25% in the first full year of ownership of the assets, which it expects to be 2016.
CRH would be due a termination fee of about EUR157.8 million if its acquisition of assets from Holcim and Lafarge didn't go through because those companies didn't successfully complete their merger.
When it announced its deal last month, CRH said it would pay a EUR157.8 million break fee to Holcim and Lafarge if its own shareholders rejected the proposed acquisition, but the Irish company would be due the same amount if either Holcim or Lafarge rejected the offer or if their merger failed.
The collapse of these deals would also impact Anglo American. Anglo last July said it would sell its 50% stake in UK building materials joint venture Lafarge Tarmac Holdings Ltd to Lafarge for GBP855 million in cash. Lafarge was then to sell the whole business on to CRH as part of its remedies to get its Holcim merger past regulators.
The sale is part of a wider Anglo American disposal programme to raise funds to reduce debt and strengthen its balance sheet. The company wants to raise between USD3 billion and USD4 billion through asset sales, according to the Financial Times.
CRH shares were down 3.9% at 1,740.00 pence in London Monday afternoon, making it the second-worst performing stock in the FTSE 100 on the day. Anglo American shares were down 0.6% at 1,048.50p.
By Steve McGrath; [email protected]; @stevemcgrath1
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