EU Approves Holcim, Lafarge cement merger

Cement companies Holcim and Lafarge cleared a major hurdle toward their planned $43 billion merger after antitrust authorities in Europe said the deal could go ahead, subject to significant asset sales in the region.

The deal, if approved by other global competition regulators, would reshape the global cement industry, spawning a construction-materials juggernaut. It had been expected to face significant hurdles from antitrust authorities, particularly in Europe, given the scale of the two companies’ operations in the region.

Margrethe Vestager, the European Union’s top antitrust official, announced the decision on Twitter late Monday. “Acquisition of Lafarge by Holcim is subject to conditions. “The merger can proceed,” Vestager tweeted, adding that it would be “good for growth.”

The EU’s approval is conditional on divestments by the two companies that Vestager described in a statement as “very substantial.”

Holcim will have to sell all of its businesses in the Czech Republic and Slovakia, two plants in Spain, and most of its activities in France relating to cement, ready-mixed concrete and aggregates, according to a statement from the European Commission, the bloc’s top antitrust regulator.

Holcim and Lafarge announced in April they were merging to create the world’s biggest cement group worth $55 billion, with an eye on booming construction in emerging markets.

The deal, a major event in the global construction industry, is based on the offer of one Holcim share for one Lafarge share.

The new company will be called LafargeHolcim and “will have a unique position in 90 countries and will be evenly balanced between developing countries and countries with strong growth,” the firms said in a joint statement.

They highlighted the match of their activities since Lafarge has a strong presence in Africa and Holcim in Latin America. However they both have big and competing interests in Europe.

The European Commission said it had had concerns that the “transaction, as originally notified, would have” hurt competition in many markets in Europe but that the two companies later “committed to divesting most of the operations where their activities overlap”.

“With the remedies, we have ensured that the creation of an increased global footprint of the group will not come at the expense of competition in the EU,” Vestager said in a statement.

“And this is the positive example today’s approval provides to other companies that may have global ambitions,” she said.

The Commission added that the two firms will not be allowed to complete their deal until it has approved the companies who will buy the assets put up for sale.

Figures showed that the new giant will employ 136,000 people, and have annual sales of €32 billion euro and underlying profits of € 6.5 billion.

The deal would generate economies of scale of €1.4 billion over three years.

Building supply companies have been expanding in emerging countries where they see huge opportunities for growth as they face sluggish conditions in the European construction industry.
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