CEO Poker

Not Cementing the Deal

Holcimi is no longer cemented to the merger with Lafarge. Source: Bloomberg
Holcim is no longer cemented to the merger with Lafarge.
  • Why it matters

    Why it matters

    The companies’ fortunes have diverged since the deal was first announced, giving Holcim’s Mr. Reitzle a stronger position to renegotiate the original merger deal.

  • Facts

    Facts

    • Cement giants Holcim of Switzerland and French-based Lafarge proposed the merger in April 2014.
    • The original deal called for a one-to-one share swap, but Holcim now proposes 0.875 shares for one Lafarge share.
    • The Irish cement manufacturer CRH wants to buy plants that Lafarge and Holcim would have to give up in a merger.
  • Audio

    Audio

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After years in top management positions at BMW, Jaguar and German gas maker Linde, Wolfgang Reitzle is nowhere near retiring.

As supervisory board chairman of Swiss cement giant Holcim, the 66-year-old German is playing high-stakes poker in the merger between Holcim and France’s Lafarge, a major rival.

On Tuesday, Lafarge’s board of directors met in Paris to consider two changes that could be deal-breakers. Mr. Reitzle no longer wants a one-to-one share swap, and is pushing for more weight to be given to Holcim.

He also insists that Lafarge’s head, Bruno Lafont, not lead the merged company.

The Lafarge board of directors decided on Tuesday to defer action on the share swaps and leadership issues – so the cliffhanger continues.

The €40 billion ($43.51 billion) merger is ultimately a power struggle between Mr. Reitzle and Mr. Lafont. In the deal announced last year, Mr. Lafont would head the new cement giant. Now Mr. Reitzle wants to be rid of the Frenchman – and has the support of Holcim’s major shareholders, including its founder-heir Thomas Schmidheiny and the whole board of directors.

Frustration has built for months over Mr. Lafont, who some refer to as “Napoleon.” Sources at Holcim say he constantly goes behind the backs of the merger committee to challenge agreements. “No one on the Holcim board wants to work with him anymore,” said one source.

The dispute over share swaps seems less difficult. Holcim recently had better financial results than Lafarge, mostly due to building in the United States. Lafarge, on the other hand, is suffering because of the crisis in Europe and problems in Africa.

Instead of a one-to-one swap, Mr. Reitzle now suggests 0.875 Holcim shares for one Lafarge share. According to sources, Lafarge wants to move only to 0.93 Holcim shares for each Lafarge share, but an agreement still seems possible.

Mr. Reitzle is not the only nuisance for Mr. Lafont. Another is the French government

In the battle over leadership, industry sources say Mr. Reitzle is not insisting that the future chairman has to be from Holcim – only that it not be Mr. Lafont.

Earlier, Lafarge had indicated acceptance for a revised share ratio, but categorically rejected changing leadership. On Tuesday, that opposition did not sound so hard anymore. It is up to the board of directors to decide the matter, sources in Paris said.

In the background, influential major shareholders have much at stake. The Belgian baron Albert Frère, a billionaire who built up media empire RTL, stands behind Lafarge. So does Egyptian industrialist Nassef Sawiris. The question remains, will they be prepared to sacrifice Mr. Lafont?

In France, Mr. Reitzle’s behavior is considered annoying. He is anything but a friend of France and a confessed euroskeptic. He also gave his blessing to the deal in its original form, though he was not directly involved.

Mr. Reitzle joined Holcim’s supervisory board in 2012. A headhunter had suggested him to succeed Rolf Soiron.

It was Mr. Soiron who got the deal started. In February 2014, he brought the strategy committee of Holcim’s board of directors into talks. On April 7, 2014, the merger plan was officially announced.

Three weeks later, Mr. Reitzle became head of the supervisory board. “He basically inherited the deal,” a Holcim source said.

Before that, he hardly knew the Lafarge chief. The two had only crossed paths at German-French manager talks in Evian.

Mr. Reitzle is not the only nuisance for Mr. Lafont. Another is the French government.

On Tuesday, the French economy ministry hinted that it placed great value on a merger of equals. But what sounds like support for Mr. Lafont, is not. For Emmanuel Macron, the economics minister, it is really about one thing: “We don’t want Holcim to simply absorb Lafarge.”

It is also important to Mr. Macron that “decision-making centers remain in France.” That is intended in the merger plan, but only as a formality. The new headquarters is set to be in Switzerland.

Mr. Macron’s ministry does not broach the leadership issue, however. Whether Mr. Lafont stays or goes does not seem to matter.

Time is on Mr. Reitzle’s side. A solution must be found by Thursday, when shareholders of the Irish cement manufacturer CRH are due to meet. CRH wants to buy a large share of the plants that Lafarge and Holcim would have to give up in case of a merger, according to regulations of the European Union Commission.

 

Holger Alich and Thomas Hanke are reporters for Handelsblatt. To contact them: alich@handelsblatt.com and hanke@handelsblatt.com

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