Cement-maker merger to create market challenge for Northstone
Irish building materials firm CRH – parent company of Belfast-based Northstone – now faces the daunting prospect of competing with a huge new cement maker as rivals Holcim and Lafarge announce a merger.
Switzerland's Holcim unveiled an all-share deal to buy France's Lafarge to create the world's biggest cement maker with combined sales of €32bn (£26.5bn).
Lafarge shareholders will receive one Holcim share for every Lafarge share held, with the combined group to be based in Switzerland and listed in Zurich and Paris, the companies said in a joint statement on Monday.
"The new group will offer higher growth and low-risk, thus creating more value," said Lafarge chief executive, Bruno Lafont, who will become chief executive of LafargeHolcim.
The transaction would be the industry's biggest-ever tie-up, and would help the companies slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector since the 2008 economic crisis.
The companies added that they expected total annual savings from joining forces of €1.4bn (£1.1bn).
The deal is expected to draw scrutiny from competition watchdogs, however, with UBS analysts pointing to anti-trust issues in key markets including Brazil, Canada, Ecuador, France, the UK, the United States, Morocco and the Philippines.
"Given the number of potential issues and required remedies, we expect a lengthy approval process, possibly taking up to two years," UBS analysts wrote.
Lafarge and Holcim confirmed on Monday that they would divest part of their portfolio worth 10-15% of global earnings before interest, tax, depreciation and amortisation (EBITDA) to satisfy anti-trust concerns.
They have combined EBITDA of €6.5bn (£5.4bn).
Two-thirds of the asset sales would be in Europe, Lafont said on a conference call.
The transaction, which has the support of both boards and the companies' core shareholders, is expected to close in the first half of 2015, the companies added.
The newly-formed enterprise will be a formidable competitor for CRH, owner of Northstone (NI) Ltd. Around 1,000 people are employed in Northstone, formerly known as Farrans. There are three divisions of the Dunmurry-based company – Farrans Construction, Northstone Materials and Cubis Industries.