Share prices of Lafarge Surma Cement were pummeled yesterday, as a US$44bn deal between the two world’s largest cement makers to create giant cement firm is now in jeopardy.
At Dhaka Stock Exchange, Lafarge stocks fell steeply 7.2%, as the proposed merger between global Holcim and Lafarge hit a debacle, said IDLC Investments in its analysis.
Managing director of VIPB Asset Management Company Shahidul Islam said: “Investors reacted negatively to the news of cracking the deal, which is bad for both the companies.”
He also observed that the share prices of Lafarge in the local market had earlier moved up over the speculation of merger deal.
“Doubt over a possible deal is not only bad news for the investors but also the market, as administrative and other duplication costs came down significantly.”
Lafarge Surma Cement in a statement said, “Holcim’s board challenges some terms of the agreement initially concluded: financial terms and governance structure.”
The deal faced an uncertainty after Swiss firm Holcim noted that its merger plan with French rival Lafarge could not go ahead in its present form.
The two firms had earlier agreed to merge in April, with Lafarge shareholders, receiving one Holcim share for each Lafarge share.
But since then, Holcim’s shares have outperformed those of Lafarge.
Holcim board pressed for the price and management structure to be changed from the original “marriage of equals”, on Monday, about nine months after the “merger of equals” was originally struck.
Switzerland-based Holcim said in a written statement it would seek changes in “the financial terms and governance structure” of the agreement with France-based Lafarge. It said specifically it wants to change the deal’s proposed one-for-one share-exchange ratio.
Lafarge, in its own statement on Monday said: “It is open to revising terms, including the proposed one-for-one share-exchange ratio.”
The company said it “remains committed” to completing the union. Under the terms of the agreement, Holcim would pay a breakup fee of $370m to Lafarge should the deal fall apart.
Negotiations over new deal terms started last week after Holcim’s board of directors and large shareholders privately decided they couldn’t support the transaction under the existing terms, according to news reports.
