International News

Cement giants clash over merger terms

Almost a year after the merger was first announced, Swiss company Holcim has rejected the terms the two parties initially agreed upon.

According to a statement issued by the company, 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”.

The merger initially involved a one-for-one share exchange ratio. However, multiple media sources indicated that Holcim’s shareholders no longer felt this was adequate, given France-based Lafarge’s weak performance for the year ended 31 December, 2014.

It was said that the considerable divergence between the two companies’ valuations was partly due to the Swiss National Bank’s decision to remove an exchange cap in mid-January that caused the value of the Swiss franc to soar to record highs.

Reports indicated that Lafarge’s 2014 financial results had also caused Holcim’s board to question Lafarge CEO Bruno Lafont’s ability to lead the combined LafargeHolcim entity as per the original merger agreement.

Lafarge responded with its own media release, which stated that it was “willing to explore the possibility of a revision of the parity, in line with recent market conditions, but it will not accept any other modification of the terms of the existing agreements”.

Despite this, a Reuters report cited sources familiar with the matter as saying the two parties were discussing new leadership for the new company, which would position Lafont in a “lesser role”.

Quarry approached both Holcim and Lafarge for comment on the matter but neither had responded by the time of publication.

Update – 21 March 2015

After hastily convened talks, The Wall Street Journal and Reuters have reported that the two companies have agreed to new terms, which will see Lafont appointed as co-chairman of LafargeHolcim. Holcim’s current chairman Wolfgang Reitzle will be the other co-chairman.

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