Holcim buys out Lafarge to create world’s largest cement maker

New entity has combined sales of $43.89 billion and is worth just under $60 billion

Holcim has bought out France’s Lafarge, creating the world’s largest cement manufacturer.

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Switzerland’s Holcim has announced an all-share deal to buy France’s Lafarge, creating the world’s largest cement maker with combined sales of $43.89 billion.

According to a Reuters report, the partners billed the deal as a merger of equals under which Lafarge shareholders will receive one Holcim share for every Lafarge share held. The combined group will be based in Switzerland, and listed in Zurich and Paris.

The new entity is worth just under $60 billion, and will see 53% percent shareholder control for Holcim and 47% for Lafarge, the companies said in a joint website statement.

The deal is the cement industry’s biggest-ever tie up, and would help the companies slash costs, trim debt and better cope with rising energy prices, increased competition and falling demand, factors that have hampered the industry since the 2008 economic crisis.

Shares in Lafarge rose 4% at the open, the top gainer on France’s blue-chip CAC 40 index, while shares in Holcim were up 5.4%.

Lafarge is stronger in Africa and Holcim stronger in Latin America, company executives told reporters on a conference call, therefore the merger strengthens both entities.

The merged group will be present in 90 countries, with emerging markets such as Latin America and Africa accounting for 60 percent of sales, but no single country representing more than 10%.

“The new group will offer higher growth and low risk, thus creating more value,” said Lafarge Chief Executive Bruno Lafont, who will become CEO of LafargeHolcim.

The companies added that they expected total annual savings from joining forces of $1.92 billion after three years, thanks to economies of scale, better operational efficiency and lower financing costs.

“Globally, it’s likely that growth over the next 10 years will be lower than in the 10 years before the financial crisis, and one has to adapt correspondingly; this is happening on the cost side,” said Vontobel analyst Panagiotis Spiliopoulos.

The deal is expected to draw scrutiny from competition watchdogs, however, with UBS analysts pointing to antitrust 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.

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