NEW YORK (The Deal) -- European cement makers Holcim and Lafarge have salvaged their $39 billion merger by shunting Lafarge CEO Bruno Lafont out of an operational role in the combined group and tweaking the share-swap ratio.

Under the terms of the new deal, investors will receive 0.9 of a Holcim share for each share of France's Lafarge they hold, shifting the former one-for-one ratio in favor of the better performing Swiss cement maker. Lafont, whose role as CEO-elect of the combined group had become a key sticking point after he fell out with Holcim executives, will become co-chairman of the new company alongside Holcim's current chairman Wolfgang Reitzle.

Lafont on Friday addressed Holcim's opposition to his appointment, claiming that tensions between the new partners were natural given the size of the deal. "My attitude ... was to show that men should not prevent this merger's implementation, and, on the contrary, should do everything to make it possible," he told a press conference.

Lafarge will propose a new CEO for the combined group in the coming weeks. Holcim's board has agreed to endorse the appointment. Lafarge CFO Jean-Jacques Gauthier has emerged as a candidate for the role, though no decision on the appointment has been taken, two people with knowledge of the situation said earlier this week.

"The name of the CEO wasn't discussed in the most recent negotiations, which went on beyond midnight on Thursday," said another source.

The companies have been scrambling to save their deal since Sunday, when Holcim told Lafarge that it would walk away unless the exchange ratio was adjusted and Lafont gave up his role as CEO. Holcim had been under pressure from shareholders to rewrite the nearly one-year-old merger plan as its results outpaced those of Lafarge. That pressure increased in early February when the shares of the two companies decoupled, and Holcim shares rose 10% relative to Lafarge stock.

By that time, the Swiss company had lost patience with the Lafarge CEO and his management of the integration process. Lafont's autocratic style was at odds with the Swiss company's more consensus-based model, and Holcim executives were dismayed by a series of decisions they felt favored Lafarge's operations and risked the partners' ability to reap the forecast €1.4 billion ($1.5 billion) of projected savings from the deal.

"I am very please that we are now able to proceed with our project," Holcim's Reitzle said in a statement. "I want to highlight that Bruno has made a tremendous contribution to getting us this far and that I am very confident in our ability to work together."

Holcim and Lafarge announced their merger last April. The deal will combine the bulk of their operations to create a cement maker with annual sales of about €32 billion and about €6.5 billion of EBITDA.

The revised exchange ratio means that Holcim shareholders will own 55.6% of the combined group, up from 53%. Shareholders of the combined group will now also receive a scrip dividend of one new LafargeHolcim share for each 20 shares they receive in the new company. The dividend was included in the deal at the request of Lafarge, said a person with knowledge of the situation.

The new terms have the support of "certain key shareholders", the companies said on Friday. Those shareholders include Lafarge's No. 2 stakeholder NNS Holding, which owns 14.9% of the French company, and Thomas Schmidheiny, who owns 20.1% of Holcim and had been integral to the push for improved terms.

"The breakthrough was only possible because all participants considered the interests of the new company to be more important than personal ambitions," he said in a statement on Friday.

Shareholders of both companies still have to vote on the revised deal. It is now expected to complete in July, a month later than its original scheduled closing date.

The rescue of the merger is also good news for Irish cement maker CRH, which has agreed to pay €6.5 billion for assets that the merger partners had to sell to ease their deal past regulators. The Irish company's shareholders on Thursday voted to approve that purchase, though it is still waiting on a verdict from the European Commission. That decision is due by April 27.

Shares in Holcim traded Friday at Sfr76.65 ($77.64), up Sfr 0.85, or 1.1%. Lafarge traded at €64.27, up €1.97, or 3.2%.

Read more from


Image placeholder title