Individual Assignment _Holcim & Lafarge

Mergers & Acquisitions Page 1

MERGERS & ACQUISITIONS

Individual Assignment on

Holcim Merger with Lafarge

A new leader for a new world

Submitted To

Prof. Shiv Nath Sinha

Submitted By

Vaibhav Gupta (2014313)


"Now as LafargeHolcim, we will step into the next phase of our transformation to become the

leader in every respect a company that has a positive impact on the world and can make a real

difference for its customers, its employees, its shareholders and society."

Eric Olsen, CEO, LafargeHolcim

1. Introduction

On April 7, 2014, Holcim and Lafarge, the two leader firms declared the intention to combine

the two companies by which has been termed as a merger of equals to be effected by way of a

public exchange offer with an exchange ratio which was initially announced as one registered

share of Holcim for one Lafarge share. The merged entity would be working towards the target

of creating it as a highest performing company in the building materials industry. It would make

them the world's biggest cement maker with combined sales of around 40 billion euros. The

Merger was unanimously approved by their respective Board of Directors and supported by the

anchor shareholders of both companies, Schweizerische Cement-Industrie-Aktiengesellschaft,

Groupe Bruxelles Lambert and NNS Holding S..r.l, in the undertaking agreements dated April

6, 2014. Later on the Boards of Directors of Holcim and Lafarge on March 20, 2015 reached an

agreement to amend certain terms of the Merger, including the exchange ratio which has been

modified to nine registered shares of Holcim for every ten Lafarge Shares. The anchor

shareholders of both companies confirmed their undertakings in confirmation undertaking

agreements dated March 19, 2015. The Combination Agreement entered into between Holcim

Ltd and Lafarge S.A. on July 7, 2014 and amended on March 20, 2015 (the Combination

Agreement) provides that Holcim Ltd shall initiate a public exchange offer with an exchange

ratio of nine registered shares of Holcim for every ten Lafarge Shares (the Exchange Offer). It

was also agreed that the combined group would be based in Switzerland and listed in Zurich and

Paris. By this merger companies are expecting a total annual savings of 1.4 billion euros. The

deal draw scrutiny from competition watchdogs from many countries wherever it is situated,

have obtained clearance of the combination by the competition authorities in the following

jurisdictions : Brazil, Canada, China, Common Market for Eastern and Southern Africa

(COMESA), European Union, India, Kenya, Mexico, Morocco, Russia, Serbia, Singapore, South

Africa, Tanzania, Turkey, Ukraine and the United-States. On 15 July 2015 LafargeHolcim


officially launched the new group around the world and the listing of the new LafargeHolcim

shares in Zurich and Paris.

Unique value proposition for shareholders

Strong capital structure

Attractive return for shareholders

Significant synergies

Best growth platform and superior operating profitability

2. About Holcim

Holcim is a Swiss-based global leader in manufacture and distribution of building materials,

cement and aggregates (crushed stone, gravel, and sand), as well as other activities, including

ready-mix concrete, asphalt, and associated services. Its USP is Innovation with quality product.

It was founded in 1912. Initially the company focused in France but during 1920 it expanded its

reach throughout Europe and Middle East. In 1950s they expanded in America. It went public in

1958. The company continued to expand in Latin America and added Asian divisions during the

1970s and 1980s. As of 2014, Holcim holds majority and minority business in more than 70

different countries across the world and employs 71,000 people. The company is the market

leader in cement production in Australia, Azerbaijan, India, Slovakia, Switzerland, and Latin

America. The reason for being in top position is due to product innovations, skilled employees

and efficient environmental management systems. In 2014, Holcim recorded net sales of over

CHF 19.1 billion.

3. About Lafarge

Lafarge is a French based industrial company specializing in three major products: cement,

construction aggregates, and concrete. The company has become a world leader in building

materials. The company has presence in over 61 countries and employs employs 63,000 people.

It recorded a total sales of 12.8 billion in 2014. As a top-ranking player in its Cement,

Aggregates and Concrete businesses, it adds to the construction of cities around the world,

through its innovative solutions by providing them with more housing and making them more

compact, more durable, more beautiful, and better connected. Lafarge contributes to building


better cities around the world, through its innovative solutions providing them with more housing

and making them more compact, more durable, more beautiful, and better connected. They have

developed solutions through which cities can provide more housing to cater the issue of housing

for all, including affordable housing, be more compact, with the construction of vertical

buildings which help reduce urban sprawl, be more durable, with long-lasting constructions and

by taking full account of environmental concerns, including energy efficiency of buildings and

water preservation, be more beautiful, enabling architectural creativity and performance and

better connected, with solutions for infrastructure such as roads, airports, stations, bridges,

tunnels, etc.

4. Industry Outlook

Holcim and Lafarge are two major leader in production of cement, aggregates (crushed stone,

sand and gravel), ready-mix concrete and asphalt, and provide related services. Their building

products and solutions are used to construct and renovate homes, buildings and infrastructure.

The vision of LafargeHolcim was to create the most advanced group in the building materials

industry. The combination will create the best growth platform in the industry and enable

LafargeHolcim to drive growth across its global, well-balanced footprint; deliver best-in-class

operating performance and returns enhanced by synergies; and fundamentally transform the

business. Furthermore, the combination will position LafargeHolcim to meet the changing

market needs by enhancing the value proposition to meet customer demands, addressing

challenges of urbanization, and setting the benchmark on corporate social responsibility,

including sustainability and climate change mitigation.

There has been mixed response about the kind of competition it will create in the industry.

Competition Commission of India (CCI), the cement majors said that after the proposed

transaction, the effective competition in the cement as well as the ready mix concrete segment

will continue to sustain and combined entity will continue to face aggressive competition from

existing players. Oxford Business Group said that the merger of Lafarge and Holcim could

shake-up the local industry of Philippines.


5. Motive and future plans

The vision of merger of LafargeHolcim was to create the most advanced group in the building

materials industry. The motive for both the companies is to gain a well-balanced footprint for

sustainable and profitable growth, so that it can deliver operating performance and returns

enhanced by synergies.

Market trends that represent motives for merger

A) Population growth and rapid urbanization driving demand for more housing and infrastructure

B) Increasing demand for value-added products and services from building materials companies.

C) Resource scarcity and climate change require environmentally friendly, energy efficient

building materials and processes.


Strategic motive of merger for company and shareholders

A) Be the preferred partner for building and infrastructure.

B) Achieve operational excellence through continuous improvement to create value.

C) Improved productivity, maintenance efficiency, process uniformity, cost-effective product

mix, design optimization and equipment reliability

D) Pro-active portfolio management and disciplined capital allocation.

E) Optimization of capital expenditures to extract the full value of the new complementary

footprint

F) Strong presence in each of the worlds major regions

Future plans for immediate years

A) Synergies: Delivering on a Euro1.4bn synergy target within three years

B) Capital allocation: Adopting a rigorous approach to capital allocation and overall reduction

of capital spending;

C) Commercial transformation: Creating differentiation through innovative products and

solutions;

D) Integration: Creating one new group and culture

E) Health and safety: Putting health and safety at the center of the organization.

6. Structuring & Financing

Initially on July 7, 2014 the offer was made by the Holcim for all the shareholders of Lafarge on

basis of a 1 for 1 exchange ratio with an agreement to have equal dividends on a per share basis

between announcement and completion. Each Lafarge shareholder tendering Lafarge shares to

the contemplated exchange offer would receive an equal number of newly issued ordinary shares

of Holcim. The offer was subject to Holcim holding at least 2/3rd of the share capital and voting

rights of Lafarge on a fully diluted basis.

Later on the Boards of Directors of Holcim and Lafarge on March 20, 2015 reached an

agreement to amend certain terms of the Merger, including the exchange ratio which has been

modified to nine registered shares of Holcim for every ten Lafarge Shares. The anchor


shareholders of both companies confirmed their undertakings in confirmation undertaking

agreements dated March 19, 2015.

The final offer was made to existing and outstanding shares of Lafarge, i.e., to Holcims

knowledge, 287,932,312 shares including all outstanding shares of Lafarge issued pursuant to

performance share plans and still in the holding period, i.e. 277,902 shares, being specified that

any outstanding holding period at the date of the exchange would apply to the Holcim Shares

received in exchange;

Apart from this the Lafarge shareholders tendering their Lafarge Shares to the Offer were not

entitled to receive the annual dividend of CHF1.30 per Holcim share for the financial year 2014

as approved by the annual shareholders meeting of Holcim on 13 April 2015, and Holcim were

not be entitled to receive the annual dividend of EUR1.27 per Lafarge Share for the financial

year 2014 as approved by the annual shareholders meeting of Lafarge on 7 May 2015. Such

annual dividends for the financial year 2014 have been paid by Holcim and Lafarge respectively

on 17 April 2015 and 12 May 2015.

As of 7 July 2015, a total of 252,230,673 shares, representing 87.46% of the share capital and at

least 81.47% of the voting rights of Lafarge SA, have been tendered. The success of the offer

was subject to the condition that a minimum acceptance threshold of 66.6% of Lafarge's share

capital or voting rights be reached by Holcim. According to the press release, the result reflects

the confidence of shareholders in the future company.

Some recent and next steps to closing

OSI April 1, 2015 Holcim and Lafarge receive clearance from Indian competition authorities

April 9, 2015 Eric Olsen appointed as future CEO of LafargeHolcim

April 14, 2015 Future Board of Directors of LafargeHolcim nominated

May 7, 2015 Lafarges combined shareholders meeting approved all resolutions submitted for their vote

May 11, 2015 Filing of the public exchange offer initiated by Holcim for the shares of

Lafarge The Board of Directors of Lafarge issues a favorable opinion

June 1, 2015 Opening of the Exchange Offer

July 3, 2015 Closing of the Exchange Offer

July 9, 2015 Publication of the final results of the Exchange Offer and listing of the

Existing Holcim Shares on Euronext Paris

July 10, 2015 Capital increase of Holcim and issuance of the New Holcim Shares in

remuneration of the Lafarge Shares tendered to the Exchange Offer


July 14, 2015 Listing of the New Holcim Shares

July 15, 2015 Re-opening of the Exchange Offer

July 28, 2015 Closing of the re-opened Exchange Offer

Aug. 4, 2015 Capital increase of Holcim and issuance of the New LafargeHolcim Shares

Aug. 6, 2015 Listing of the New LafargeHolcim Shares

NG EXPECTED IN JULY 2015 Number of shares composing the share capital and total number of voting rights of

LafargeHolcim Ltd

Date Number of shares

composing the share

capital

Total number of voting rights

July 13, 2015 554,093,981 Theoretical number of voting rights: 554,093,981

Number of voting rights exercisable at shareholders

meetings(*): 464,852,438

(*) Number of voting rights exercisable at shareholders meetings = theoretical number of

voting rights (i.e. total number of voting rights attached to the shares composing the share

capital) number of shares without voting rights (treasury shares and shares not registered in the

share register)

Future Executive Committee

Future Executive Committee of LafargeHolcim was recommendation by Eric Olsen, who is the

CEO of the combined Group. Executive Committee will work under the leadership of Eric Olsen

Finance, Thomas Aebischer, currently in charge of Finance at Holcim

Integration, Organization & Human Resources, Jean-Jacques Gauthier, currently in

charge of Finance at Lafarge

Europe, Roland Khler, currently in charge of Europe at Holcim

Asia Pacific, Ian Thackwray, currently in charge of East Asia Pacific and Trading at

Holcim

Middle-East Africa, Sad Sebbar, currently in charge of Morocco at Lafarge

North America, Alain Bourguignon, previously in charge of North America and UK at

Holcim

Latin America, Pascal Casanova, currently in charge of France at Lafarge

Performance and Cost, Urs Bleisch, currently in charge of Corporate Functions at Holcim

Growth and Innovation, Grard Kuperfarb, currently in charge of Innovation at Lafarge


Apart from this following direct reports of the future CEO have been selected under project

mode:

Strategy and M&A, Christof Haessig, currently in charge of Corporate Finance and

Treasury at Holcim

Communication, Public Affairs and Sustainable Development, Alexandra Rocca,

currently in charge of Communication, Public Affairs and Sustainable Development at

Lafarge

Legal, Xavier Dedullen, currently in charge of Legal & Compliance at Holcim

Health and Safety, Sapna Sood, currently in charge of Health and Safety at Lafarge.

For Indian Operation

Bernard Terver currently responsible for Africa Middle East as well as South Asia will assume

the position as Head of India for LafargeHolcim from the date of the closure of the merger. In

this capacity he will continue his mandates in the Boards of Ambuja Cements and ACC

Limited in India.

Major planned and finalized acquisitions in cement industry

Buzzi Unicem finalises acquisition of Russia's Uralcement for Euro104m (02 December

2014)

Buzzi Unicem has completed the acquisition of 100% of Uralcement from for Euro104m in cash.

The acquisition of Uralcement's plant in Korkino raises Buzzi Unicem's annual production

Cpacity in Russia to 4.5Mt/yr. In September 2014 Buzzi Unicem, via its German wholly-owned

subsidiary Dyckerhoff, agreed to acquire Uralcement, subject to regulatory approvals expected

by the end of 2014.

HeidelbergCement to buy Jaiprakash Associates cement plant

According to the Financial Express, Jaiprakash Associates is close to selling its 1Mt/yr capacity

cement plant at Sikandarabad, Uttar Pradesh to HeidelbergCement for around US$78.6m.

Ultratech Cement plans to acquire JP's Bhilai plant (20 May 2015)

UltraTech Cement plans to buy Jaiprakash Associates' Bhilai plant for US$330 345m. The plant has US$87.5m of debt.

Bestway Cement Limited takes over Lafarge Pakistan (23 April 2015)

Bestway Cement, a subsidiary of Bestway Group, has announced assumption of management

control of Lafarge Pakistan. This follows the company's successful bid for 75.86% of Lafarge

Pakistan's shares for US$329m in July 2014. Bestway Cement also acquired another 12.07%


shares of the target company through the public offer process taking its shareholding in Lafarge

Pakistan to 87.93%.

Seruji buys 60% stake in Savannah Cement (31 March 2015)

Mauritian company Seruji has acquired a 60% stake in Athi River-based Savannah Cement

following approval from the Competition Authority of Kenya (CA).

Seruji completed the buyout from China's Wan Ho International, which held 40% and Acme

Wanji, which owned 20%. Savannah Heights has retained a minority stake in Savannah Cement.

The shareholding shake-up makes Savannah Cement Kenya's first fully-owned cement producer,

as both Seruji and Savannah are owned by Savannah Cement founder Benson Ndeta.

UNACEM completes Ecuador acquisition (04 December 2014)

Peruvian cement producer Union Andina de Cementos (UNACEM) has completed the purchase

of Lafarge's cement operations in Ecuador. "We are pleased with the closing of the transaction,

which represents an important step in our growth strategy," said Carlos Ugs, managing director

of UNACEM. The company closed the acquisition, which was initially announced in May 2014,

for approximately US$517m. The deal involves the purchase of a 1.4Mt/yr cement plant located

in Otavalo, in the north of Ecuador.

Taiwan Cement buys Sichuan Railway Group Cement for US$111m (05 November

2014)

Taiwan Cement, is purchasing Sichuan Railway Group Cement for US$111m to expand its

presence in China. Taiwan Cement made the purchase through its subsidiary TCC International

Holdings. The Sichuan Companys production site has a cement production capacity of 2Mt/yr.

UltraTech completes acquisition of cement units of Jaypee Cement (03 September 2014)

UltraTech Cement has completed the acquisition of cement plants of Jaypee Cement Corporation

(JCCL) in Gujarat State. UltraTech informed the Bombay Stock Exchange that the acquisition

process had been completed and became effective from 12 June 2014.

In September 2013 UltraTech acquired the cement unit of JCCL, which comprised an integrated

cement plant at Sewagram and a grinding plant at Wanakbori, for US$627m. Post-acquisition,

UltraTech's total capacity in India stands at 58.8Mt/yr. including overseas capacity it is 62Mt/yr.


Exhibits

Exhibit1: Consolidated statement of income of Group Holcim

Million CHF 2014 2013

Net sales 19,110 19,719

Production cost of goods sold (10,548) (11,087)

Gross profit 8,562 8,632

Distribution and selling expenses (4,924) (5,021)

Administration expenses (1,321) (1,254)

Operating profit 2,317 2,357

Other income 179 204

Share of profit of associates and joint ventures 140 161

Financial income 183 183

Financial expenses (611) (777)

Net income before taxes 2,207 2,128

Income taxes (588) (533)

Net income 1,619 1,596

Attributable to:

Shareholders of Holcim Ltd 1,287 1272

Non-controlling interest 332 324

Earnings per share in CHF

Earnings per share 3.95 3.91

Fully diluted earnings per share 3.95 3.91


Exhibit 2: Consolidated statement of financial position of Group Holcim

Million CHF 12/31/2014 12/31/2013

Cash and cash equivalents 2,149 2,244

Accounts receivable 2,695 2,521

Inventories 1,863 1,704

Prepaid expenses and other current assets 317 365

Assets classified as held for sale 283 756

Total current assets 7,307 7,590

Long-term financial assets 491 536

Investments in associates and joint ventures 1,758 1,562

Property, plant and equipment 21,410 20,029

Intangible assets 7,779 7,486

Deferred tax assets 527 391

Other long-term assets 412 351

Total long-term assets 32,378 30,355

Total assets 39,684 37,944

Trade accounts payable 2,101 1,934

Current financial liabilities 2,502 2,920

Current income tax liabilities 419 462

Other current liabilities 1,634 1,708

Short-term provisions 234 224

Liabilities directly associated with assets classified as held for sale 33 213

Total current liabilities 6,923 7,461

Long-term financial liabilities 9,291 8,785

Defined benefit obligations 863 655

Deferred tax liabilities 1,415 1,290

Long-term provisions 1,080 1,077

Total long-term liabilities 12,649 11,807

Total liabilities 19,572 19,267

Share capital 654 654

Capital surplus 7,776 8,200

Treasury shares (82) (102)

Reserves 9,082 7,453

Total equity attributable to shareholders of Holcim Ltd 17,430 16,205

Non-controlling interest 2,682 2,471

Total shareholders' equity 20,112 18,677

Total liabilities and shareholders' equity 39,684 37,944


Exhibit 3: Consolidated statement of cash flows of Group Holcim

Million CHF

2014 2013

Net income before taxes 2,207 2,128

Other income (179) (204)

Share of profit of associates and joint ventures (140) (161)

Financial expenses net 429 594

Operating profit 2,317 2,357

Depreciation, amortization and impairment of operating assets 1,430 1,538

Other non-cash items 217 178

Change in net working capital (393) (217)

Cash generated from operations 3,571 3,857

Dividends received 73 137

Interest received 124 145

Interest paid (582) (652)

Income taxes paid (679) (659)

Other expenses (8) (42)

Cash flow from operating activities (A) 2,498 2,787

Purchase of property, plant and equipment (1,968) (2,205)

Disposal of property, plant and equipment 209 205

Acquisition of participation in Group companies (2) (8)

Disposal of participation in Group companies 36 407

Purchase of financial assets, intangible and other assets (300) (263)

Disposal of financial assets, intangible and other assets 300 199

Cash flow from investing activities (B) (1,724) (1,665)

Payout on ordinary shares (424) (374)

Dividends paid to non-controlling interest (297) (202)

Capital paid-in by non-controlling interest 6 6

Movements of treasury shares 11 0

Proceeds from current financial liabilities 3,833 6,252

Repayment of current financial liabilities (3,506) (6,465)

Proceeds from long-term financial liabilities 2,849 2,635

Repayment of long-term financial liabilities (3,453) (3,471)

Increase in participation in existing Group companies (3) (5)

Decrease in participation in existing Group companies 10 0

Cash flow from financing activities (C) (975) (1,625)

(De)Increase in cash and cash equivalents (A + B + C) (201) (503)

Cash and cash equivalents as at January 1 (net) 1,993 2,711

(De)Increase in cash and cash equivalents (201) -503

Currency translation effects 150 (215)

Cash and cash equivalents as at December 31 (net) 1,942 1,993


Exhibit 4: Consolidated statement of income of Lafarge


Exhibit 5: Consolidated statement of financial position of Lafarge


Exhibit 6: Consolidated statement of cash flows of Lafarge


References

http://www.globalcement.com/news/itemlist/tag/LafargeHolcim

http://www.cemnet.com/News/story/157204/lh-merger-final-results-of-public-exchange-offer.html

http://www.finanzen.net/nachricht/Holcim-Press-Release-on-the-Filing-of-a-Draft-Public-Exchange-

Offer-and-the-Related-Draft-Offer-Document-for-the-Shares-of-Lafarge-4334471

http://www.lafarge.com/en/financial-reports

http://www.bloomberg.com/news/articles/2014-04-07/holcim-to-merge-with-lafarge-to-form-biggest-

cement-maker

http://www.thestar.com.my/Business/Business-News/2015/04/11/Uncertain-outlook-for-cement-

industry/?style=biz

http://business.financialpost.com/investing/how-holcim-lafarges-cement-mega-deal-could-shake-up-

canadas-construction-industry?__lsa=ee1a-795b

Individual Assignment _Holcim & Lafarge

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