The board of family-controlled Swiss cement company Holcim Ltd. has rejected important parts of a proposed €42 billion ($44 billion) merger with Lafarge SA, a French cement company. Holcim is seeking better financial terms and wants to block the appointment of Bruno Lafont as CEO of the combined company. Lafont is currently the CEO of Lafarge.
A
Wall Street Journal
article
said that in addition to casting doubt over whether the merger will take place, Holcim's demands could affect both companies' efforts to shed assets in order to win regulatory approval.
The
Journal
report said that Holcim wants to change the Lafarge deal's proposed one-for-one share exchange and fears that Lafont will not be able to achieve a planned €1.4 billion in annual savings.
“Holcim's operating performance and share price have outperformed those of [Lafarge] since the deal was struck,” the
Journal
article said. Also, because of the rising value of the Swiss franc, Holcim's shares are now worth more in euros, the report noted. Holcim's board has proposed a new ratio of one share of the new company for 0.875 Holcim share, which would give Holcim shareholders greater ownership in the merged entity.
A
Financial Times
report said
Holcim objects to Lafont because his “personality and culture would not gel with the rest of the management.” The
FT
report added, “People close to Lafarge say Holcim's effort to block Mr. Lafont is simply a power play, following a push to renegotiate the financial terms of the deal.”
The
FT
article cited an unnamed Lafarge adviser who said Holcim's demand to remove Lafont represented an assertion that Holcim wanted control of the board. The
FT
article added that sources close to Holcim deny this.
“People close to Lafarge say that while the company was willing to negotiate on financial aspects of the merger, it would not reopen governance issuesâ¦,” the
FT
article said. “It remains to be seen, however, if Lafarge shareholders will sacrifice Mr. Lafont to get the deal done, or perhaps agree a compromise that will see him spend a year or two in Switzerland and then move on.”
The
Journal
report noted that Thomas Schmidheiny, who owns about a fifth of Holcim and is a descendant of the founder, is among those opposed to the original terms of the deal.
Holcim must pay a breakup fee of €350 million ($370 million) to Lafarge if the merger is scrapped, the
Journal
article said. (Sources:
Wall Street Journal
, March 17, 2015;
Financial Times
, March 17, 2015.)
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