Holcim Ltd In Merger Talks With Lafarge SA

Holcim

Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN), a holding company based in Switzerland engaged in manufacturing, distribution and marketing of building materials, is negotiating a merger with its French counterpart, Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG), according to report from Bloomberg.

Holcim – Lafarge merger talks confirmed

In a statement, the two largest manufacturers of building materials worldwide confirmed that they are exploring a merger of equals to build their “strengths and identities. According to Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG), it has not reached any agreement with Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN), and it cannot assure that the discussion will lead to a definitive agreement.

Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN) and Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG) increased their dominance in the cement industry through acquisitions. In 2008, the French cement manufacturer purchased Orascom Cement for 10.2 billion euros. The Swiss cement manufacturer bought Aggregate Industries for $4.1 billion in 2005.

Cost cutting measures

In an interview with Bloomberg, Ian Osburn, an analyst at Cantor Fitzgerald, noted that there is still a massive oversupply in the industry and that a merger will help the cement manufacturers‘ “cut a lot of costs and dominate a few more markets.”

“This is traditionally the time when you’d see M&A in these sectors in upswings, when profits and margins are improving,” added Osburn.

Bernard Fontana, the chief executive officer of Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN), implemented cost-cutting measures to improve the profitability of the company. He joined the company in 2012 and carried out a cost-cutting program similar to that which he implemented during his tenure at Aperam, a steel maker.

Last August, Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN) agreed to swap its assets in Germany and the Czech Republic with Cemex SAB de CV (ADR) (NYSE:CX) (BMV:CEMEXCPO), the largest cement manufacturer in the Americas, to improve its returns.

On the other hand, Bruno Lafont, CEO of Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG), is also reducing the company’s expenditures, selling assets to improve its credit rating, and pushing sales of its higher-margin services.

Regulatory scrutiny

Osborne believed that a merger between the two largest cement manufacturers will face regulatory scrutiny. According to him, Holcim Ltd (ADR) (OTCMKTS:HCMLY) (VTX:HOLN) and Lafarge S.A. (ADR) (OTCMKTS:LFRGY) (EPA:LG) may need to sell assets in the United States and Europe to gain approval.



About the Author

Marie Cabural
Marie received her Bachelors Degree in Mass Communication from New Era University. She is a former news writer and program producer for Nation Broadcasting Corporation (NBC-DZAR 1026), a nationwide AM radio station. She was also involved in events management. Marie was also a former Young Ambassador of Goodwill during the 26th Ship for Southeast Asian Youth Program (SSEAYP). She loves to read, travel and take photographs. She considers gardening a therapy.