20th Mar 2015 06:47
LONDON (Alliance News) - The boards of Holcim Ltd and Lafarge SA on Friday said they have reached an agreement on revised terms of their proposed USD41 billion merger, with Holcim getting a more favourable exchange ratio and the heads of both cement companies to be co-chairmen of the merged entity, in news likely to give a boost to Irish construction materials firm CRH PLC.
The mega-deal had run into problems earlier this week after the board of Swiss-based Holcim said it would no longer pursue a merger with France's Lafarge on the current terms and wanted to hold talks about changing the exchange ratio and "governance issues".
Media reports claimed Holcim wanted a bigger share of the combined entity and also changes to the proposed management of the group, a move that was being pushed by its large shareholders after its shares and earnings outperformed that of Lafarge since the deal was first announced in April last year.
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 Chairman and Chief Executive Bruno Lafont was to run it as chief executive.
But on Friday Holcim and Lafarge said they had reached an agreement on revised terms, including a new exchange ratio of 9 Holcim shares for 10 Lafarge shares.
A new chief executive for the combined group, which will be proposed by Lafarge and accepted by Holcim, will be appointed following the closing of the transaction. Holcim Chairman Wolfgang Reitzle and Lafont will be non-executive co-chairmen of the combined company.
The resolutions will be presented to Holcim shareholders at a meeting on or around May 7, Holcim said. The pair also agreed that, subject to shareholder approval, the new company will announce a post-closing scrip dividend of 1 new LafargeHolcim share for each 20 existing shares.
"I am very pleased that we are now able to proceed with our project to create a truly outstanding global leader in building materials. Bruno Lafont and I will work closely together to ensure that the value creation potential of this merger will be realised for the benefits of all shareholders," said Reitzle.
FTSE 100-listed CRH saw its shares come under pressure on Monday following the news that the Holcim-Lafarge merger was on the rocks. 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 shareholders on Thursday approved the asset purchase with 99.99% in favour.
The Holcim-Lafarge also had hurt shares in Anglo American PLC, the FTSE 100-listed miner. 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.
By Sam Unsted; [email protected]; @SamUAtAlliance
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