Swiss cement maker Holcim's board has sought a review of the terms of the proposed $44 billion merger with France's Lafarge SA, which sought to create the world’s largest cement group, according to a statement on Monday.
This puts a spanner into the mega deal which also had repercussions for Indian business of the two firms. The deal was also to create a profitable and clean exit for Baring PE Asia, which had picked a small stake in Lafarge's Indian arm in an unconventional special situations deal for $265 million in 2013.
Holcim has said that the “combination agreement can no longer be pursued in its present form" due to the differing performances of the groups since the deal was sealed. The group has proposed to re-negotiate the one-to-one share exchange ratio as well as governance issues.
In a separate statement, Lafarge said that it is willing to consider revising the share exchange ratio, but not the other aspects of the deal.
The deal, which was announced in April 2014, was supposed to combine the firms on an equal basis under which Lafarge shareholders were to receive one Holcim share for every Lafarge share held, with the combined group to be based in Switzerland and listed in Zurich and Paris.
The proposed deal would have created the world's largest cement maker and the combined organisation would have also overtaken AV Birla's UltraTech to become the largest cement producer in India. Holcim already controls two of the three top cement companies in India- ACC and Ambuja Cements but is behind UltraTech in terms of production capacity.
Lafarge had forayed into the Indian cement market in 1999 with the acquisition of Tata Steel's cement activity. Later in 2008, Lafarge also acquired L&T's concrete business.
The company has plants in Chhattisgarh, Jharkhand, Bihar, West Bengal and Rajasthan and had recently commissioned an integrated cement plant in Rajasthan with a split blending unit in Haryana with a combined installed capacity of 2.6 metric tonnes per annum (MTPA). As on September 2014. Lafarge India had a capacity of 11 MTPA.
The proposed global merger, the industry's biggest-ever such deal, was expected to be completed in the first half of 2015.
It is yet to get a green signal from Indian anti-trust authority Competition Commission of India (CCI). Media reports, citing sources, have suggested that CCI has asked the firms to divest some assets in eastern region of the country as the deal would affect competition in the region.
The cement industry has in the past come under the scanner for alleged price fixing.
Holcim said on Monday that it has decided to restrict the agenda for the scheduled annual general meeting on April 13, 2015, to Holcim.
“This decision has been taken due to pending antitrust clearance in the US and India, pending EU approval of CRH as purchaser of divested assets, as well as delays in the social process in France,” it said.
Recently, Irish cement manufacturer CRH Plc agreed to acquire certain assets of Holcim and Lafarge for a total consideration of €6.5 billion ($7.34 billion), in a move that will make the Irish firm the world's third-largest cement firm by market value.
The assets being acquired by CRH would comprise operations across Europe, the US, Canada, Brazil and the Philippines.
At the time of announcement of merger, Lafarge and Holcim had said the two companies are looking to sell overlapping assets that represented about €5 billion in revenue to ensure regulatory approval for their merger.