Holcim-Lafarge leftover assets seen enticing bidders

Once Holcim Limited and Lafarge SA start shedding assets across the world to complete their $40 billion merger, cement producers from Europe to the US are likely to start lining up with offers.

The assets up for grabs represent about $1 billion of profits that Holcim and Lafarge, the cement industry’s two biggest companies, may siphon off to satisfy anti-trust regulators in a handful of countries.

While two-thirds of the asset disposals will be in Europe, analysts predict some of the cement plants and construction-aggregates businesses in the US and Canada will also be divested.

Likely bidders for the North American cement plants may include Europe’s HeidelbergCemant AG and Titan Cement Co., as well as Mexico’s Cemex SAB, according to Susquehanna International Group LLP.

CRH plc, an Irish company that gets half its sales from the US, is another logical suitor, said Thompson Research Group.

For the aggregates, which are crushed rocks, gravel and sand, potential buyers are Vulcan Materials Co. and Martin Marietta Materials Inc., as well as private-equity firms, depending on which cities the assets are in, the analysts said.

“Some of these are prime assets that don’t come up for sale very often, so pretty much anybody involved in the industry will be thinking about whether to pick them up,” Ian Osburn, a London-based analyst for Cantor Fitzgerald LP, said. “The bidding will be competitive. This merger is potentially a game-changer, so it’s going to focus a lot of minds on what the industry is going to look like.”

Jona, Switzerland-based Holcim and Paris-based Lafarge confirmed their merger plans earlier this month after Bloomberg News first reported the discussions.

The deal terms include swapping one Holcim share for one Lafarge share, valuing the transaction at about 29 billion Euros ($40bn) last week, including net debt.

In anticipation of regulators’ scrutiny, the companies plan to divest 10 percent to 15 percent of their combined earnings before interest, taxes, depreciation and amortisation, which Holcim said is equivalent to about $1 billion.

Besides selling assets in Europe, where the companies are based, disposals also may take place in Canada, the US, Brazil, India and China, said Lafarge CEO Bruno Lafont, who will lead the merged entity.

All of the divestitures may be valued at 7 billion Euros ($9.7bn), or about 8 times Ebitda, Harry Goad, a London-based analyst at Credit Suisse Group AG, estimated in an April 10 report.

In the US, Lafarge and Holcim have the third- and fourth-biggest shares of the cement market, respectively, with about 27 percent combined, according to IBISWorld Inc.

The merged entity would overtake Cemex, which was previously No. 1 with 21 percent of the US market. Heidelberg Cement is No. 2, while Texas Industries Inc. has a 5.3 percent share and is being acquired by aggregates-maker Martin Marietta. That deal makes Martin Marietta the fifth-largest cement producer.