Holcim and Lafarge renegotiate terms

HOLCIM and Lafarge were in talks to renegotiate some terms of their merger to placate investors unhappy about a gap in performance since the cement makers agreed to a deal in April, said people familiar with the matter.

The two sides are discussing changes to the 1-to-1 shareexchange ratio that would give Holcim shareholders a bigger stake in the combined company, the people said, asking not to be identified as the talks are not public.

The boards of both companies would need to approve any adjustment and an announcement might come as early as this month, the people said.

Plans to combine Holcim and Lafarge were announced to great fanfare, with the heads of both companies lauding the creation of the world’s biggest cement maker with sales of $40 billion (R493bn) and operations in 90 countries. Since then, Holcim has outperformed Parisbased Lafarge on everything from sales to profit, prompting some investors in the Swiss company to call for a bigger stake in the new entity.

No decision has been made and the companies could also decide to keep the current terms unchanged, the people said.

Holcim said that “the state of affairs currently remains unchanged” as “both companies continue to work on different workstreams to conclude the planned merger”. A Lafarge spokeswoman declined to comment.

The Financial Times reported the talks between the two companies to renegotiate some terms on Wednesday.

The agreed exchange ratio is a disadvantage for Holcim shareholders, and the Swiss firm’s outlook on a stand-alone basis would be better, a Swiss shareholder with about 1 percent of Holcim, who asked not to be identified publicly criticising the deal, said last month.

Eurocement Holding, the company’s second-largest shareholder, is also concerned about the deal’s structure, according to people familiar with the matter.

Another option to placate shareholders was paying a special dividend, the people said. Holcim and Lafarge may also decide to make personnel changes after recent disagreements between executives from both companies, the people said.

Holcim and Lafarge in December said they would each contribute five managers to the executive board of the new company. Bruno Lafont, the chief executive of France’s Lafarge, was picked to lead a board that includes Holcim finance chief Thomas Aebischer. Some investors were critical of Lafont because of Lafarge’s lagging performance, they said.

Holcim’s biggest shareholder, Thomas Schmidheiny, said this week that the agreed merger still made sense. – Bloomberg