The two biggest cement manufacturers in the world Holcim Ltd and Lafarge are in negotiations to form a joint venture with sales of up to $40 billion. The merger is intended to check high energy costs and help optimize production capacities.
The companies are merging as equal partners as they seek to utilize their “strengths and identities,†the two firms said. Holcim is based in Jona, Switzerland while Lafarge is based in Paris, France.
It is expected that the all-share deal will be made public on April 7, according to reports from persons familiar with the on-goings.
The two firms will keep two stock market listings and headquarters in Switzerland and France.
Lafarge shares jumped 8.9% in Paris on Friday, putting the cement maker’s value at $25.2 billion while Holcim advanced 6.9% in Zurich, with its value standing at $29.4 billion after the firms confirmed the negotiations.
“There is still massive oversupply in the industry,†said analyst Ian Osburn of Cantor Fitzgerald. He added that the deal would help the two companies cut production costs significantly and play a leading role in a few more markets.
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But as Bloomberg reports, any deal would go through regulators’ scrutiny in several markets across the globe. Osburn added that the companies would have to sell their interests in Europe and US.
A possible transaction would be scrutinized in Europe, including France, Spain and Germany. Similarly, oversight authorities in Russia, Hungary and the Czech Republic may have interest in reviewing the deal.
Construction and material markets in Europe responded well to reports of the discussion on Friday, bolstering the Stoxx Europe 600 Index to a six-year peak. HeidelbergCement AG of Germany surged 4.3% after the news.
Reports by Valuewalk suggest that Lafarge said it has not reached a conclusive deal with Holcim and couldn’t ascertain that the on-going talks will lead to a deal. Â
To contact the writer of the article: Yashu Gola at yashu@forexminute.com
