Lafarge denies a report in the Financial Times they are lining up asset disposals to pay down debt and avoid anticompetitive action
FRANCE’s world leader in cement production, Lafarge, yesterday denied a report in the Financial Times that it and joint- venture partner AngloAmerican are lining up asset disposals to pay down debt and avoid anticompetitive action as they seek to combine their UK cement and general construction businesses.
"The information in the Financial Times is a rumour, on which we do not wish to comment," Claire Mathieu, of group communications in Paris, said yesterday.
In February, Lafarge and Anglo American announced an agreement to combine their cement, aggregates, ready-mixed concrete, asphalt and contracting businesses in the UK, comprising Lafarge Cement UK, Lafarge Aggregates and Concrete UK, and Anglo’s Tarmac UK.
"Please refer to the press release sent on February 18 … ‘Completion of the transaction is conditional upon regulatory approvals. Both Lafarge UK and Tarmac UK operations will continue to operate independently until obtaining such approvals,’" Ms Mathieu said.
Yesterday, an Anglo spokesman in London told Business Day that its Tarmac UK business had been identified as a non- core asset as far back as October 2009. "The joint venture is subject to regulatory approval and we are co-operating with the relevant authorities to achieve clearance as soon as practicable — we are unable to comment on the proposed joint venture, the time frames or expected regulatory process," the spokesman said.
Tarmac sold its French and Belgian building materials business for about $88m in May last year, earlier having sold its construction aggregates assets in France, Germany, Poland and the Czech Republic.
The company also sold its Polish concrete products business, with combined proceeds expected to be about $400m.
Yesterday’s Financial Times report stated the "potential joint venture, announced in February with expected combined sales of £1,8bn, is planning to sell about £600m of cement plants, quarries and ready-mix concrete mills," according to people familiar with the discussions.
According to the Financial Times report, some possible asset buyers might take a plan to the Office of Fair Trading as soon as next month — significantly earlier than expected when the joint venture was announced.
The groups are understood to be looking at shedding capacity of up to 8-million tons a year for aggregate, 1,5-million tons for asphalt and 400000m³ per year of concrete, but potential buyers are said to be restricted by competition issues and high debts.
Lafarge’s rival Holcim — the world’s second-largest cement maker — is seen as a potential suitor because the group has no UK cement assets, importing product from mainland Europe or purchasing it from rivals. But the sale to Holcim of Lafarge’s Hope cement works in northern England would likely only raise about half the targeted £600m.
The parties earlier said the combining of their businesses would form an equal joint venture that would create a leading UK construction materials company with a portfolio of high-quality assets, and earnings before interest, taxes, depreciation and amortisation of £210m.
This combination was expected to deliver substantial recurring synergies of at least £60m per year, including increased operating efficiencies, improved logistics, and the introduction of value-added products across a wider geographic reach.
Lafarge CEO Bruno Lafont recently vowed to regain the group’s investment grade credit rating, which it lost last month amid fears over the effect the turmoil in the Middle East would have for its operations there.
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