New giant admits sale of factories in Brazil

The French Lafarge and Holcim Switzerland, which yesterday announced a merger creating the largest group of construction material in the world, estimated that Brazil will be one of the countries where you may have to sell assets to obtain the green light from the competition authorities for the transaction.
"In Brazil, we recognize that we have a great issue to deal with, especially after this investigation of the Cade [Administrative Council for economic Defense]," said Rolf Soiron, Chairman of the Board of Directors of Holcim, Valor. And added: "I don't know if it's the biggest case, I don't know what's going to pass, but we'll talk with the authorities in Brazil".
Cement companies in Brazil wage a tough battle with Justice Antitrust because of cartel formation in process of 2005. Cade's trial held in late January, still not completed due to the request of one of the counselors, applied to Holcim ticket exceed half a billion dollars, in addition to the obligation to dispose of assets with annual production capacity equivalent to 22% of which operates today.
"Has much rumor, but didn't officially the decision of Cade, nothing came to the company," noted Bernard Fontana, current President of Holcim and that will integrate a restricted group to format the new company, with the aim to complete the merger in the first half of 2015. He noted that Lafarge, in turn, is not involved in the case of the cartel in Brazil, so that doesn't change the situation for the transaction in the country.
In total, Lafarge and Holcim plan to sell assets worth € 5 billion worldwide to limit its market share and adapt to demands of competition authorities in several countries.
The disinvestment will represent between 10% and 15% of Ebitda (earnings before interest, taxes, depreciation and amortization) of the new group, said Bruno Lafont, Chairman of Lafarge. Most of the disinvestment will be in Europe, with little more than € 3 billion, where clearly the two groups estimate have too much capacity when added. He did not comment on the operations in emerging countries.
"At this point it is impossible to say how much will be sold in Brazil," said Lafont, appointed as new Chairman of the future group. Soiron said, however, that if the sale in Brazil is required "will be very little" on a total of emerging us disinvestment. "Just to see you have disinvestment in India, the Philippines and other countries."
Fontana, CEO of Holcim, noted that at the moment there are several scenarios of disinvestment, but no decision taken. "And we're not even going to tell you what's going to, will, be sold, because it can devalue our active," he said. To Soiron, Lafarge and Holcim of leaders will have to act quickly to resolve regulatory issues, especially where there may be problems, as in Brazil, India, Canada, and especially in Europe.
According to Abdelkader Benchiha, Natixis analyst, quoted by the French newspaper "Les Echos", there would be potential problems of competition in the USA, Canada, Brazil and France, where the new group would have a dominant position.
The Brazil, despite regulatory problems, it was not precisely a theme for the merger, said Fontana. The deal in the Brazilian market represented only 80 million Swiss francs ($ 86.3 million) to 3.9 billion Swiss francs ($ 4.2 billion) of the company's Ebitda Switzerland in 2013. The combined Ebitda of Holcim and Lafarge was of 7.8 billion francs (US $ 8.4 billion) in the year.
Lafont, current CEO of Lafarge, reiterated that Brazil "is important for the new group, because it's a big country with huge construction projects and needs a lot of infrastructure".
As noted, investment in value Soiron progress by Holcim won't be suspended because of accumulation of ability in a new group. "There's no way to stop it would be stupid," he said.
For analysts, the merger represents clear offensive strategy to counter the giants from emerging countries, such as Chinese Anhui Conch, first world producer of cement, Cemex and the Mexican, seventh.
The new group-with annual revenue of $ 43 billion-will have a presence in 90 countries and distribution ' balanced ' between developed nations and with strong growth (emerging). The new company will be called LafargeHolcim.
For Lafont, the signs of world economic recovery and low interest rates can help sell the factories to meet the requirements of regulatory authorities.