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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)

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"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

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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

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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.

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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.

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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

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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

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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 Total number of voting rights
composing the share
capital

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

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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%

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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.

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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

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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

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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

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Exhibit 4: Consolidated statement of income of Lafarge

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Exhibit 5: Consolidated statement of financial position of Lafarge

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Exhibit 6: Consolidated statement of cash flows of Lafarge

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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

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