Lafarge buys Blue Circle for $3.6 billion, becomes world's largest cement maker

After being rebuffed last April in its efforts to purchase the U.K.-based Blue Circle Industries, Lafarge SA of Paris announced on Jan. 7 that it was acquiring the remaining shares (about 67%) of Blue Circle for US$3.6 billion cash. Lafarge already held 22.6% of Blue Circle, and its investment bank, Dresdner Kleinwort Benson, owns 9.7%. Lafarge's offer is about 10% more than its original offer last year, which was voted down by Blue Circle shareholders after the company entered into an aggressive anti-takeover campaign.

Acquiring Blue Circle strengthens Lafarge's presence geographically, particularly in Southeast Asia and the Mediterranean, although certain plants in Canada may have to be sold off to avoid saturating the marketplace.

Recent strength in the Euro against the British currency was a key factor in Lafarge's friendly bid for Blue Circle because it allowed Lafarge to improve on last year's bid at no extra cost in domestic currency terms. Including the Blue Circle shares already held by Lafarge, an exceptional Blue Circle dividend, and reduction in Blue Circle shares in circulation, the offer is essentially unchanged from the final offer made last year.

Lafarge said it will fund nearly US$1 billion of the acquisition via a preferential rights issue, and increase debt by US$2.6 billion. While analysts were relieved that new equity issuance is limited, they also said that Lafarge's debt burden is too high. This means the company must deliver quickly on its promise to sell off US$1.4 billion of assets over 18 months, which concerns mostly Blue Circle industrial installations in North America and real estate in the United Kingdom.

The deal still must be approved by the U.K. High Court, and the parties must renotify to the European Commission, which had previously approved Lafarge's original takeover bid. Lafarge said it expects the deal to be completed by this summer. Of the savings from the merger, 40% will come in the form of synergies within the combined group's central structure, Lafarge said. Another 25% will come from operations in countries where both groups are present. The final 35% will be created through lower production and purchasing costs as well as a streamlined logistics system.

Lafarge's Piecuch resigns;
BCI's Gentles leaves board

Just days after the announcement of the acquisition of Blue Circle Industries by Lafarge SA, the board of directors of Lafarge Corp., the North American construction materials division of Lafarge SA, appointed Philippe Rollier as president and CEO, effective May 8, the date of the annual shareholder meeting. John M. Piecuch, current president and CEO, is resigning and leaving the company “to pursue other interests,” according to a statement issued by Lafarge.

Rollier began his career with the Lafarge Group in 1969 in Paris and was appointed group Executive Vice President in 1999. From 1973 to 1979, he held sales and financial management positions in the group's Canadian operations. Since 1995, he has been Regional President in charge of central Europe and Confederation of Independent States countries (Russia, Ukraine) for cement, aggregates, and concrete.

Piecuch has worked for Lafarge Corp. since 1987, and has been president and CEO of Lafarge Corp. since October 1996. (For a recent interview with Piecuch, see Cement Americas, November/December 2000, pp 27-37.)

Also, in mid-February, Blue Circle's chief operating officer, Gary Gentles, announced he had decided to investigate “opportunities that may present themselves in which he could be interested…including [ones] which may or may not arise in relation to transactions carried out in the context of the [Blue Circle] acquisition process.”

While he has no specific plans at present, according to a statement released by Blue Circle, Gentles felt the need to inform the company's board of directors. Gentles indicated his intention to resign as a director of Blue Circle, which took effect Feb. 14. He will, however, retain his position as chief operating officer and will continue to have responsibilities for implementing the company's Operational Improvement Program.

CEMENT TOTALS — NOVEMBER 2000

Portland and blended cement shipments in the United States and Puerto Rico totaled 8.3 million mt in November 2000. This was 11% less than revised shipment data for November 1999, according to the U.S. Geological Survey. Consumption declines, many in excess of 10%, were experienced by most states. Cumulative shipments through November 2000 were 101.2 million mt, a 2% increase compared with those of the same period in 1999. Clinker production totaled 6.87 million mt in November, 4% more than production data for November 1999. Cumulative production through November 2000 was 72.5 million mt, a 3% jump compared to 1999. Masonry cement shipments of 336,890 mt in November were 9% less than revised data from November 1999. Cumulative shipments through November 2000 were almost 4.08 million mt, virtually unchanged compared to the same time period in 1999.