The Swiss cement maker has reset deal terms with its French partner. That’s fair – the new exchange ratio keeps the tie-up a merger of equals. But Holcim has also managed to veto Lafarge’s Bruno Lafont as CEO. Lafarge’s concession suggests its shareholders are anxious for a deal.
The new mid-sized miner will emerge with comparatively little debt. While BHP Billiton is spinning off unloved assets, South32’s balance sheet will be strong enough to allow new investment. The low gearing could also make it an attractive takeover target for a debt-funded bidder.
It’s a big bet. The Irish building group will increase leverage – even with a big equity issue – to buy surplus assets from Lafarge worth a third of its market cap. CRH got sucked into an auction too. Yet investors cheered. It’s how things work in a low-return, low-growth world.
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