Divestments would be needed to complete the merger, which would effectively create the world’s largest construction materials company by revenue with annual sales of around $USD43 billion ($AUD46.3 b) and a market capitalisation of around $USD50 billion ($AUD53.9b).
Assets that would be up for grabs represent about $USD1 billion ($AUD1.1 b) of profit that Holcim and Lafarge may siphon off to satisfy anti-trust regulators in a handful of countries.
Two-thirds of the asset disposals would be in Europe, but analysts have predicted that some of the cement plants and construction and aggregates businesses in the United States and Canada would also be divested.
Private equity investors and other cement makers from mature and emerging countries have shown interest in buying the companies? plants, with likely bidders for the North American cement plants including Europe?s HeidelbergCement and Titan Cement, as well as Mexico?s Cemex SAB. CRH, an Irish company, could be another.
For the aggregates businesses, potential buyers include Vulcan Materials and Martin Marietta Materials, as well as private equity firms.
?Some of these are prime assets that don?t come up for sale very often, so pretty much anybody involved in the industry will be thinking about whether to pick them up,? said Ian Osburn, a London-based analyst for Cantor Fitzgerald. ?The bidding will be competitive. This merger is potentially a game-changer, so it?s going to focus a lot of minds on what the industry is going to look like.?
The proposed merger is still pending approval from Holcim shareholders, from the European Commission, and from competition authorities in the countries where the combined company would operate.
However, Holcim chief financial officer Thomas Aebischer said the intention would be to complete the deal by the first half of 2015.
Holcim profits down
Not long after announcing its intention to merge with Lafarge, Holcim reported that its net profits in the first quarter of 2014 fell by 57.5 per cent to $USD91 million ($AUD98.1 m) compared with the corresponding period in the previous year.
According to Holcim, the figures were skewed by a one-off boost in the first quarter of 2013 arising from the sale of a 25 per cent stake in its Australian operations, meaning the January to March performance this year was not comparable.
Despite the group’s explanations, analysts polled by the Swiss-based financial news agency AWP said that the first quarter performance was a disappointment given that they had foreseen around $USD93 million ($AUD100.3 m) in profit.
Holcim’s operating profit was up by 9.3 per cent thanks to the group’s ongoing cost-cutting drive, with an official company statement claiming that it was on track to meet its target of an operating profit increase of around $USD1.7 billion ($AUD1.8 b) by the end of 2014.
At the time of publication, Lafarge had yet to report its first quarter 2014 results.
Sources: The Business Recorder, The Wall Street Journal, Bloomberg