Lafarge Surma Cement Limited is likely to make the best out of the potential merger of Switzerland’s Holcim and French Lafarge.
Analysts say the merger could deliver significant benefits to customers and shareholders of Lafarge Surma.
The boards of both Holcim and Lafarge have agreed to the merger of their companies to create the world’s largest cement maker, Le Figaro newspaper reported yesterday.
The paper said the Holcim board met early Saturday and that of Lafarge later in the day, but did not give a source. However, the two companies had confirmed talks to merge on Friday.
Lafarge Surma Cement yesterday posted price sensitive information at the Dhaka Stock Exchange news server to aware investors of the possible merger, which later yesterday was confirmed by a French newspaper.
Lafarge Surma Cement is a company of Lafarge and Cementos Molins of Spain, each holding equal share in 58.87% of the company.
The disclosure posted early morning yesterday at DSE said: "The discussions for merger are based on principles consistent with a merger of equals which build on the strengths and identities of the two companies. No agreement has yet been reached and no assurance can be given that these discussions will lead to a definitive agreement. Lafarge will inform the public of any material developments in this respect.”
Masud Khan, finance director at Lafarge Surma Cement Limited, said: "It goes without saying that the merger will make the company bigger and capture more of the market share resulting in a possible higher earnings. However, it wouldn’t happen overnight.”
Win-win situation for both in Bangladesh
Lafarge Surma has more capacity than used to produce clinker while Holcim needs to outsource more of it to meet its sales demand, and therefore the merger will benefit each of the companies, creating a win-win situation, according to an equity research firm.
However the magnitude of the win-win situation may be as large as it could have been, as several projects of Holcim will be completed in 2014, adding further clinker and cement production capacity.
In Bangladesh, the grinding capacity at the Meghnaghat plant near Dhaka will be completed, adding 700,000 tonnes of cement, said annual report of Holcim.
Moreover, once merged, the different price segmentation of the companies would also be a concerning factor where the product price of one company is higher than the other.
"Globally merger of such big companies in a particular sector take more time while regulators in many countries prevent such mergers. However in Bangladesh it may not be so as neither are the industry leaders here,” said Khandakar Safwan Saad, senior research analyst at Brac EPL Stock Brokerage Limited.
Holcim and Lafarge roughly make up 15% of the country’s cement industry with Lafarge having slightly more than Holcim, he said.
He added: "Such or any mergers are rare in our country, and may take up a couple of years for the companies to actually go through with the proceedings.”
Another analyst added: "It can also be assumed that the merger will result in laying off employees and change in management.”
Bruno Lafont, CEO of Lafarge, will be in charge of operations as CEO of the new group while the new president would be Swiss, said Le Figaro.
Lafarge Surma Cement is performing well lately in the country. It has reported a rise of 37% in its consolidated profit of Tk254.6 crore against previous year’s Tk185.3 crore.
The company had a loss of Tk206.7 crore as of September last year, which analysts believe to be recovered in the upcoming year.
