Holcim-Lafarge cement mega-merger to be felt in Canada – by Nicolas Van Praet (National Post – April 8, 2014)

The National Post is Canada’s second largest national paper.

MONTREAL – Holcim Ltd. and Lafarge SA confirmed they will merge to form the world’s biggest cement maker in a deal with significant market concentration implications in Canada and other countries.

The two companies are already among the world’s largest suppliers of cement, crushed stone and sand and gravel. In combining into a new producer with annual revenue of US$40-billion, management of the two companies believe they will be required to sell assets representing about 18% of that revenue to satisfy competition regulators.

In Canada, Lafarge and Holcim together employ about 9,000 people and hold about half of the cement market, according to a 2008 estimate published by the Cement Association of Canada. The industry is centered in Ontario and Quebec.

Rivals such as Bolton, Ont.-based James Dick Construction Ltd. said they were surprised by the announcement, but added it could create an opportunity to grow their own businesses by buying what Lafarge and Holcim are forced to discard. Dick specializes in so-called aggregates, which are granular construction materials such as gravel and sand.

“I don’t think it’s bad news. It’ll open it up a bit for us,” company president Jim Dick said Monday. “We would expand if it makes sense.”

Montreal-based Power Financial Corp., a holding company that has interests in insurer London Life among others, has an indirect stake in France-based Lafarge through Groupe Bruxelles Lambert. Power’s co-chairman, Paul Desmarais Jr., sits on Lafarge’s board.

As Lafarge’s largest shareholder with a 21% stake, Groupe Bruxelles Lambert is backing the merger proposal, saying the combined company will benefit from a platform of growth of “unrivalled quality and considerable value creation potential.” GBL said it would own about 10% of the new company. It was not immediately clear if Mr. Desmarais would seek a seat on the new board.

The merger of Jona, Switzerland-based Holcim and Paris-based Lafarge comes after the global recession peeled away demand for building materials and forced some companies to run their operations at a loss. The merger partners believe their marriage will lead to cost savings and efficiencies of more than 1.4 billion euros (US$1.9-billion).

A December 2013 on the cement market by independent economist Colin Sutherland found Quebec currently has about 1.2 million tons per year of unused capacity while eastern Pennsylvania and New York has about 600,000 tons. That means many plants are operating well below maximum volume.

For the rest of this article, click here: http://business.financialpost.com/2014/04/07/holcim-lafarge-deal-will-get-scrutiny-from-brussels-to-ottawa/

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