PARIS - Switzerland's Holcim and France's Lafarge agreed last week to new terms for their plan to create the world's top cement business, giving unhappy shareholders in the Swiss company a better deal but leaving a key leadership question unanswered.
While the merger is back on track after a rocky few weeks, the deal still could founder over who will run the combined entity with annual sales of more than $32 billion.
After days of intense negotiations, the two companies agreed Lafarge shareholders would receive nine Holcim shares for every 10 Lafarge shares they hold rather than the one-for-one ratio agreed when the deal was unveiled in April last year.
The companies also agreed that Lafarge boss Bruno Lafont no longer would become chief executive, instead taking on the role of non-executive co-chairman, alongside Holcim's chairman, though they have yet to decide who will take the CEO role.
The lack of a decision on a replacement CEO leaves questions over what tensions remain between the two sides. Lafont's removal from the role, along with the realigned share exchange, also make the deal look less like the merger of equals it was presented as almost a year ago.
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"This is not enough to secure the deal, and it's not the end of the story," Bernstein analysts said in a research note.
Since the merger was announced last April, Holcim investors had watched the companies' relative business performances diverge. A stronger Swiss franc also became a factor, along with questions over Lafont's style and record.
The new share-swap ratio means Holcim shareholders would own 55.6 percent of the new group, up from 53 percent previously, and the deal is now expected to close in July rather than June.
Holcim shares closed 0.5 percent higher at 76.15 Swiss francs on Friday and Lafarge stock ended 2.12 percent higher at 63.62 euros. There are Holcim and Lafarge facilities in the Twin Ports; how a merger might affect those facilities was not immediately clear.
Sticking point
Lafont's proposed role had become a major sticking point for Holcim, which threatened to abandon the deal last week if the terms were not revisited. The Swiss side questioned his ability to deliver the 1.4 billion euros in promised cost savings and disliked his brash management style, sources have said.
Under the revised deal, Lafont will be co-chairman along with Holcim Chairman Wolfgang Reitzle. Lafont is due to propose a new chief executive in the coming weeks. A source close to the situation said the plan was for a new candidate to be named before Holcim's annual shareholder meeting on May 7.
In another change to the plan, the CEO will not be a member of the board, Lafont told Le Figaro newspaper in an interview late Friday. A Lafarge spokeswoman confirmed the change.
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The companies also said that certain key shareholders on both sides had confirmed their support for the revised merger terms.
Thomas Schmidheiny, a former Holcim chairman who has a 20.1 percent stake and is heir to the company's founder, welcomed the new agreement.
"This breakthrough was only made possible because all people involved attached more importance to the interests of the new corporation than to their own ambitions," he said in a statement.
The position of Russian businessman Filaret Galchev, who owns 10.8 percent of Holcim via Eurocement Holding AG, could be key. He declined to comment on Friday.
Nassef Sawiris, who owns 16 percent of Lafarge, told Reuters last week that he backed the deal and was not worried about Holcim shareholders not voting for it.
