THE MEGA-MERGER planned between French cement manufacturer Lafarge and its Swiss rival Holcim has been put on hold while the two firms renegotiate the terms of the deal.
Holcim confirmed yesterday that “the combination agreement can no longer be pursued in its present form”. When the deal was announced in April 2014, it was described as a share-for-share deal. However, Holcim has since outperformed Lafarge. In addition, the Swiss franc has seen significant strengthening in recent months, while the euro remains weak.
Holcim said it had “proposed to enter into negotiations in good faith around the exchange ratio and governance issues”, but added that Lafarge has indicated that it refuses to renegotiate, except in terms of the exchange ratio. Meanwhile, Lafarge said it had received a letter from Holcim “challenging the financial terms and governance structure of the proposed merger of equals”.
The French firm said it remains committed to the project, and intends to see the merger implemented. The company also said that while it is “willing to explore the possibility of a revision of the parity, in line with recent market conditions”, it will not accept any other modification of the terms of the existing agreements.
When the merger was first confirmed, the newly created business was to be led by Lafarge chairman and chief executive Bruno Lafont. According to reports, Holcim is also challenging this proposal.
Shares in Lafarge dropped by 6.25 per cent yesterday, while Holcim’s dipped by 1.33 per cent.