CRH to hold €6.5 billion acquisition EGM despite fears over Holcim-Lafarge merger

CRH says it will press ahead with a shareholders' meeting on Thursday to ratify its €6.5 billion purchase of assets arising from the merger of Holcim and Lafarge, despite uncertainty over whether that €40 billion deal will go ahead.

CRH will also receive a break fee of more than €157 million if Swiss company Holcim and its French peer Lafarge, the world’s two biggest building materials groups by revenue, fail to complete the merger they agreed last summer.

The future of the Holcim-Lafarge merger was thrown into doubt yesterday after Holcim, whose shares have performed better than its putative partner since the deal was agreed, said its directors had “concluded that the combination agreement can no longer be pursued in its present form”.

Under pressure from its biggest shareholders, Holcim indicated that it wants a better deal in the exchange of shares between the two companies and also hinted that it wanted to reopen discussions on “governance” issues.

Greater control

Analysts interpreted the latter reference as indicating that Holcim wants greater management control over the merged entity, which was to be run by the Lafarge chief executive,

Bruno Lafont

.

A person familiar with the situation said Holcim no longer accepted that Lafont should head the new company, while a major Holcim shareholder said seven seats each on the board was no longer deemed a fair split.

According to the person familiar with the situation, Holcim has proposed changing the agreed one-for-one share exchange ratio to 0.875 Holcim shares for each Lafarge share.

Lafarge also released a statement to the markets, indicating it is prepared to reopen negotiations on the share exchange element of the deal, but hinting it will oppose any other changes, opening up the possibility of a dispute over board and management control.

“Lafarge’s board of directors remains committed to the project that it intends to see implemented,” the company said.

A person familiar with the situation said Lafarge may accept 0.93 Holcim shares for each one of its own.

CRH said it “noted” the respective positions of both sides. It confirmed that its shareholders meeting to ratify its purchase of the mostly European assets will go ahead and said further announcements would be made “in due course”.

Share-price danger

David Holohan

, the head of research at

Merrion Capital

, warned that a failure by CRH to complete the transaction could result in a “double-digit” percentage fall in its share price.

“Although we expect terms to be agreed between Holcim and Lafarge, there is an expectation already in the market that the merger will occur and any risk that the merger fails could have a hugely negative impact on CRH given that the company has already raised new capital to acquire these assets,” he said.

CRH raised €1.6 billion in a share placing and negotiated debt facilities to fund its bid for the Holcim-Lafarge assets.

Merrion advised its clients to reduce their holdings of CRH, which fell close to 5 per cent yesterday. – (Additional reporting: Reuters)