(Minews) - Holcim Ltd. and Lafarge SA on Monday moved a step closer to completing their $40 billion merger, as the two companies said they are in exclusive talks to sell some of their assets to Irish building-materials company CRH PLC.
In a joint statement, Holcim and Paris-based Lafarge said they entered negotiations with CRH to sell cement factories and other facilities to CRH for €6.5 billion ($7.34 billion), part of a selloff required to get approval from antitrust authorities in Europe and elsewhere.
The sale is needed to clinch the go-ahead from regulators who are examining the proposed linkup. Holcim, based in Jona, Switzerland, and Lafarge are seeking to 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 €5.2 billion in 2014 and operating profit of €744 million.
When their merger was announced, Lafarge and Holcim had said they were considering selling assets that represented about €5 billion in revenue.
The two companies on Monday said they expect to get about €5 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 said.
CRH won the bidding after a battle 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 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 might sell 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 combined company, which would be called LafargeHolcim.
CRH said separately that the deal would be funded with cash, debt and a 9.99% equity placing. The company said late Monday it had raised €1.6 billion by placing 74 million new shares with institutional investors.
CRH said the deal—involving 685 sites, including 24 cement factories—would 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 acquisition to date 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.
But, he added, 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.” 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.
