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Holcim and Lafarge merger talks stall

Article By: ,  Financial Analyst
March 16, 2015 11:26 AM

Merger talks between two major cement companies have stalled.

Swiss firm Holcim and French rival Lafarge have been in discussions to create the world's largest cement maker, but the former has put the brakes on the deal. Holcim said that the deal could not exist "in its present form" despite the two sides agreeing to the merger in April. The original merger gave Lafarge shareholders one Holcim share for each Lafarge share.

However, since then Holcim's shares have outperformed that of its French counterpart. The Swiss company share price closed 0.24 per cent on Friday (March 13th) while Lafarge opened 4.40 per cent down on Monday (March 16th). It has prompted Holcim to call off the current merger deals, which would create a company with a combined value of €32 billion (£22.8 billion).

Holcim said in a statement: "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."

Despite the disappointment at the announcement, Lafarge said that it was committed to the long-term value of the deal and said it would be looking into the "possibility of a revision of the party, in line with recent market conditions".

Long-running talks

This latest turn in events did not seem like a possibility when the deal was originally brokered in April. At the time, the two companies stated they would be selling assets to help ease competition concerns of their respective shareholders.

Bruno Lafont, chief executive of Lafarge, who would go on to become the head of the merged organisation, explained that the new group would offer "higher growth and low risk". He was confident the company would be able to deliver more value for its shareholders and directors in the future.

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