CRH's €7bn buy-out of the UK’s biggest cement maker has been thrown into doubt after a setback in the merger of Lafarge and Holcim.
CRH recently agreed to buy Lafarge Tarmac, which employs 6,600 staff at 330 sites and produces 45 million tonnes of aggregates and 7 million tonnes of asphalt a year, in a deal seen as key to smoothing the regulatory path for the €42bn merger of France’s Lafarge and Switzerland’s Holcim to create the world’s largest cement group.
Last April the pair agreed the mega-merger in a deal where Lafarge shareholders received one Holcim share for each Lafarge share. But since then Holcim’s shares have outperformed Lafarge’s stock.
Today Holcim said it 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.”
Lafarge replied that it “remains committed to the project.”
But it added: “The board said it is willing to explore the possibility of a revision of the parity, in line with recent market conditions, but it will not accept any other modification of the terms of the existing agreements.”
The move throws into jeopardy CRH’s acquisition which includes assets covering operations in Europe, North America and emerging markets. The rationale for selling the unit to CRH disappears unless the merger is completed.
CRH, which is Ireland’s largest firm, noted the statements by Holcim and Lafarge and said that it still planned to hold its own shareholder meeting to approve the potential acquisition later this week.
The total deal is worth €6.5bn and will give CRH the number one market position in the UK in cement, aggregates, ready-mix concrete, asphalt and construction.
Lafarge Tarmac was formed in January 2013 following the merger of Anglo American and Lafarge’s cement, aggregates, ready-mixed concrete, asphalt and asphalt surfacing operations in the UK.
In order for the Lafarge Tarmac sale to CRH to proceed, the operation’s 50% owner Anglo American will first sell its stake in the UK business to Lafarge.
As well as ownership of Lafarge Tarmac, the deal will give CRH a presence in a number of new markets such as Germany and the Czech Republic.
It has been reported that private equity firm KKR is set to pick up any assets which CRH may need to sell in order to address competition concerns.