By John Revill
ZURICH--Holcim Ltd. and Lafarge SA on Monday moved a step closer
to completing their $40 billion merger as the two companies
confirmed they are in exclusive talks to sell some of their assets
to Irish building materials company CRH PLC.
In a joint statement Jona-based Holcim and Paris-based Lafarge
said they entered negotiations with CRH to sell cement factories
and other facilities to CRH for EUR6.5 billion ($7.34 billion),
part of a selloff required to get approval from antitrust
authorities in Europe and the rest of the world.
The sale is needed to clinch the go-ahead from regulators who
are examining the linkup between Holcim and France's Lafarge which
will create a building materials giant.
The Wall Street Journal reported over the weekend that
Dublin-based CRH was close to a deal to buy the assets, citing
people familiar with the matter.
"Lafarge and Holcim announce they entered exclusive negotiations
further to a binding commitment made by CRH regarding the sale of
several assets, " the two cement companies said Monday.
The assets include operations mainly in Europe, Canada, Brazil
and the Philippines, which generated estimated sales of EUR5.2
billion in 2014 and operating profit of EUR744 million.
When their merger was announced, Lafarge and Holcim had said
they were considering selling assets that represented about EUR5
billion in revenue.
The two companies on Monday said they expected to get around
EUR5 billion in cash from selling the plants, which include most of
Holcim's assets in France and all Lafarge Tarmac sites in the U.K.
apart from the Cauldon plant in Staffordshire.
"We have reached a major milestone in our merger," said Holcim
Chief Executive Bernard Fontana, who will stand down after the
linkup is complete.
The merger between the two cement companies, which had combined
sales of $39.3 billion in 2013, is on track to be completed as
planned in the first half of 2015, Mr. Fontana told reporters.
The bidding process was still active in the last 72 hours for
the assets, the company said. CRH won the battle following a race
with a private-equity consortium including Blackstone Group LP,
Cinven and Canada Pension Plan Investment Board, people familiar
with the matter said.
The sale of the cement assets in Europe, Canada, the
Philippines, and Brazil is a precondition of winning antitrust
approval for the deal.
Approvals have now been achieved in 12 of 20 jurisdictions
needed for the deal to go ahead, the companies said, including the
European Union, subject to asset disposals.
The green light is still needed in the U.S., India and
Canada.
Holcim and Lafarge may sell some more assets, but the "vast
majority of what we need to divest is now in this project with
CRH," said Lafarge CEO Bernard Lafont, who is due to take over as
head of the new combined company, which will be called
LafargeHolcim.
CRH said separately that the deal will be funded with cash, debt
and a 9.99% equity placing.
CRH said the deal, involving 685 plants including 24 cement
factories, will make it the third-largest building materials
company in the world after the merged LafargeHolcim and France's
Saint-Gobain SA. It would also be the largest-ever acquisition by
an Irish company, according to financial data provider
Dealogic.
The Dublin-based company would be looking at the assets and
could eventually sell some of them, Chief Executive Albert Manifold
said in an interview, although there wouldn't be large-scale
divestitures.
"Not all of them are going to remain with us in the long term,"
Mr. Manifold said. CRH didn't buy the businesses to sell them
because it was an industrial player, he said.
But now is a good time in the economic cycle to buy cement
plants and other facilities, as the U.S. is starting to recover and
in Europe "the worst is behind it," he added. CRH would also be
able to examine further acquisitions after the deal, Mr. Manifold
said.
Bank of America Corp., J.P. Morgan Chase & Co. and UBS AG
advised CRH.
HSBC Holdings PLC, Credit Suisse Group AG, BNP Paribas SA and
Morgan Stanley are selling the assets. Holcim is advised by Goldman
Sachs Group Inc. and Lafarge by Zaoui & Co. and Rothschild.
Inti Landauro and Shayndi Raice contributed to this article.
Write to John Revill at john.revill@wsj.com
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