Lafarge and Holcim agree to merger

Both boards of directors unanimously approve merger with full support of core shareholders

HOLCIM and Lafarge have today announced that their intention to combine the two companies through a merger of equals has been unanimously approved by their respective boards of directors and fully supported by the core shareholders of both companies.

Both parties say LafargeHolcim, a new global company with European roots, would deliver compelling benefits for all stakeholders and would be in the best position to contribute to addressing the challenges of increasing urbanization.

LafargeHolcim would have an enhanced presence in the global building materials sector with a number one position globally across cement, concrete and aggregates, and new opportunities to optimize production and commercial networks. Combined sales would amount to around €32 billion (CHF39 billion) with EBITDA of around €6.5 billion (CHF8 billion).

Following a strategic optimization of the portfolio through a proactive divestment process, in anticipation of regulatory requirements, combined operations would include production sites located in 90 countries across all continents with the most balanced and diversified portfolio in the industry. No country would account for more than around 10% of combined revenues.

LafargeHolcim would be listed on the SIX in Zurich and Euronext Paris, and would continue to be domiciled in Switzerland. They would operate under local governance rules with a board composed of equal numbers of Lafarge and Holcim directors, and through the distribution of central corporate functions in France and Switzerland.

The chairman of the new board would be Wolfgang Reitzle, future chairman of Holcim, whilst Bruno Lafont, current chairman and chief executive officer of Lafarge, would become CEO of the new group and member of the board. Thomas Aebischer, Holcim’s chief financial officer would become CFO of the new group, and Jean-Jacques Gauthier, Lafarge’s CFO, would become chief integration officer of the new group. The executive committee would be formed from both Lafarge and Holcim management.

In order to ensure efficient execution of the merger, an integration committee will prepare the integration plan to be implemented immediately after the closing of the transaction. Holcim CEO Bernard Fontana will remain in charge of Holcim until completion of the transaction and will co-chair the integration committee.

Both parties say the proposed merger would enable optimized capital allocation across the expanded footprint to drive improved return on capital employed and strong cash-flow generation, while the robust balance sheet would provide financial strength.

Post merger, LafargeHolcim would expect the following annual synergies:

• €1.4 billion (CHF1.7 billion) of incremental synergies on a full run-rate basis phased in over three years with one third in year one
  • €1.0 billion (CHF1.2 billion) at EBITDA level through best practices, scale and cross-utilization of innovative products and solutions
  • €200 million (CHF240 million) in financial savings
  • €200 million (CHF240 million) in capital expenditure optimization.

Commenting on the announcement, Rolf Soiron, current chairman of Holcim, said: ‘This proposed merger is a once in a lifetime opportunity to deliver substantially better value to customers with more innovation, a wider range of products and solutions and more sustainability and enhanced returns to shareholders.

‘LafargeHolcim will be uniquely positioned to take advantage of growth in developed markets and the world’s fastest growing economies by supplying the materials that will enable the construction industry to meet the challenges of the future.’

Bruno Lafont (pictured), chairman and CEO of Lafarge, commented: ‘By combining Holcim’s experienced teams, complementary geographies and innovative expertise with ours, we propose to set up the most advanced group in the construction industry, for the benefit of our clients, our employees and our shareholders.

‘I am confident that this merger of equals provides a unique opportunity to rapidly create the most advanced platform in our industry with outstanding synergies. With a best-in-class international portfolio, robust balance sheet and strong governance, the new group will offer higher growth and low risk, thus creating more value.

‘With a best-in-class international portfolio, robust balance sheet and strong governance, the new group will offer higher growth and low risk, thus creating more value.

‘The merger of Lafarge and Holcim will allow the group with strong roots in Europe to enter into a new dimension in our ambition to contribute to building better cities on a global scale and in a sustainable manner.’

The proposed combination would be structured as a public offer filed by Holcim for all outstanding shares of Lafarge on the basis of a one-for-one exchange ratio with an agreement to have equal dividends on a per-share basis between announcement and completion.

Each Lafarge shareholder tendering Lafarge shares to the contemplated exchange offer would receive an equal number of newly issued ordinary shares of Holcim. The offer would be subject to Holcim holding at least two-thirds of the share capital and voting rights of Lafarge on a fully diluted basis.

The proposed combination is conditional upon, among other things, execution of definitive documentation, approval of the shareholders of Holcim and obtaining required regulatory and other customary authorizations. Completion is expected by the end of the first half of 2015, subject to obtaining the necessary regulatory approvals.