Europe’s two largest cement companies Holcim and Lafarge have rescued a stumbling €41 billion (Euros) merger by reconciling differences over financial terms and management that nearly caused the collapse of one of the biggest deals in recent years, London’s Financial Times reports.
The agreement ends several days of intense negotiations to salvage a tie-up aimed at creating enormous cost savings and a powerhouse in the cement and crushed stone industry.
What was initially agreed as a one-for-one share deal when it was announced last April will now be adjusted in favor of Holcim, after the Swiss company outperformed its French rival financially and saw the relative value of its shares enhanced by the strengthening of the Swiss franc.
Under the new arrangement, Holcim will pay about 0.90 of its shares for each one in Lafarge, people familiar with the matter said.
In addition, Bruno Lafont, chief executive of Lafarge, is now set to become co-chairman of the combined group rather than its new head.
As the two companies have worked on integration matters, Holcim’s senior management has grown concerned in recent months over the 58-year-old Frenchman’s ability to meld two distinct business cultures and to deliver on the €1.4 billion (Euros) in annual cost savings promised by the two companies.
He will share the chairman role of the enlarged entity with Wolfgang Reitzle, Holcim chairman.
Private talks to salvage the merger were thrust into the spotlight on Monday after Holcim said the deal to create the world’s biggest cement company could “not be pursued in its present form.”
The Swiss group, whose value has surged since the deal was agreed last April, wanted its shareholders to get a bigger stake in the merged entity. They also protested the appointment of Lafont as the head of the new company.
However, large shareholders on both sides remained supportive of the deal even as problems surfaced – motivated in part by the large cost savings promised.