Holcim and Lafarge last week announced their intention to combine the two companies through a merger of equals, unanimously approved by their respective Board of Directors and fully supported by the core shareholders of both companies.

This new global company with European roots would deliver compelling benefits for all stakeholders. LafargeHolcim would be in the best position to contribute to addressing the challenges of urbanization: affordable housing, urban sprawl and transport. The new Group would increase its offer to customers through innovation delivered on an expanded scale, best in class R&D and a combined portfolio of solutions and products. Both companies have pioneered sustainability and climate change mitigation in the industry and are committed to take it to the next level.

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. Lafarge and Holcim pro forma combined sales amount to c. CHF 39bn / EUR 32bn and Ebitda to c. CHF 8bn / EUR 6.5bn. 
After a strategic optimization of the portfolio through a pro-active divestment process, in anticipation of regulatory requirements, LafargeHolcim would occupy complementary positions. Combined operations would include production sites located in 90 countries across all continents with the most balanced and diversified portfolio in the industry. This will deliver highly attractive growth prospects across both high growth and developed markets. No country would account for more than c.10% of combined revenues.

LafargeHolcim would be listed on the SIX in Zurich and Euronext Paris. It would continue to be domiciled in Switzerland. It would operate under the local governance rules with a board composed with equal numbers of Lafarge and Holcim directors and through an efficient distribution of central corporate functions in France and Switzerland. The Chairman of the new board would be Wolfgang Reitzle, future Chairman of Holcim. Bruno Lafont, Chairman and CEO of Lafarge would become CEO of the new group and member of the board. Thomas Aebischer, Holcim’s CFO would become CFO of the new group. 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 straight after the closing of the transaction.

Bernard Fontana, Holcim CEO will remain in charge of Holcim until completion of the transaction. He will co-chair the integration committee.

The proposed merger would enable optimized capital allocation across the expanded footprint to drive improved ROCE, and strong cash-flow generation and the robust balance sheet will provide financial strength. LafargeHolcim will maintain an attractive dividend policy.

LafargeHolcim expects the following annual synergies:

• CHF 1.7bn / EUR 1.4bn of incremental synergies on a full run-rate basis phased in over three years with one third in year one
  • CHF 1.2bn / EUR 1.0bn at Ebitda level through best practices, scale and cross-utilization of innovative products and solutions
  • CHF 240m / EUR 200m in financial savings
  • CHF 240m / EUR 200m in capital expenditure optimization.

The proposed combination would be structured as a public offer filed by Holcim for all outstanding shares of Lafarge on the basis of a 1 for 1 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 2/3^rd 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 H1 2015 subject to obtaining regulatory approvals.

The parties will proceed with required information and consultation procedures with the relevant employees representative bodies of Lafarge and Holcim regarding the proposed transaction prior to execution of the final documentation. The exchange offer would be filed with the Autorité des Marchés Financiers (AMF) after relevant regulatory approvals have been obtained and would be subject to review by the AMF in France.

The exchange offer will not be open to the public in the United States or any jurisdiction other than France where action to permit the offer is required.

Thomas Schmidheiny, GBL and NNS Holding Sarl have entered into agreements in support of the proposed combination.

“I am very proud to propose today this new chapter in Lafarge’s long industrial history which is the fruit of the commitment of our people over the years. 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. “For years, I have had the utmost respect for Holcim. 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.”  - Bruno Lafont, Chairman and CEO of Lafarge “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. “Both companies put customers and staff development first to ensure that the new group can deliver best in class operational excellence” - Rolf Soiron, current Chairman of Holcim

 

2014-04-14