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Power Financial has stake in giant cement industry merger

A Lafarge facility in the east Toronto Portlands in July 2012.

Peter Power/The Globe and Mail

Senior executives at Power Financial Corp., a subsidiary of the Desmarais family controlled Power Corp. of Canada, will be following closely the proposed blockbuster merger of the world's top two cement makers and attendant antitrust concerns.

Montreal-based Power Financial and its Belgian partner Frère group hold an indirect stake in France's Lafarge SA, whose board has approved a plan to merge with Switzerland's Holcim Ltd., creating the world's biggest construction-materials company.

Groupe Bruxelles Lambert (GBL) said on Monday it backs the proposed merger. It is the largest shareholder of Lafarge with a 21-per-cent stake and says it will contribute all of its shares to the one-for-one share-exchange offer to be launched by Holcim after it receives all regulatory approvals.

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If the deal goes through as proposed, GBL will end up with a position of about 10 per cent in the newly created entity.

GBL said its Lafarge holding represents a market value of 3.9-billion or 24 per cent of its adjusted net assets based on Friday's closing stock price.

Power Financial Europe BV and the Frère group each hold a 50 per cent interest in Parjointco N.V., which in turn holds a 55.6 per cent interest in Pargesa Holding SA. Pargesa in turn owns 50 per cent of GBL's capital and controls 52 per cent of its voting rights.

The combined market share of the two makers of cement, gravel, asphalt and other products would be close to 60 per cent in France, Canada and Morocco and 30 per cent n the United States.

Annual revenue would be in the $43-billion (U.S.) range.

Some antitrust experts have cautioned that the merger as proposed will be difficult to push through and concessions in the form of asset sales are likely.

Lafarge has extensive operations in Quebec.

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The company is fighting a proposed financing by the provincial government of a $1-billion cement plant rival McInnis Cement wants to build in the economically hard-hit Gaspé region.

Bombardier Inc.'s Beaudoin-Bombardier family owns a controlling stake in McInnis Cement.

Lafarge claims that any government financial assistance to the project would result in unfair competition and result in an overflow of cement in an already saturated domestic market.

McInnis says its project would not be competing with existing cement works in Quebec as the majority of its production would be exported to the U.S.

Holcim is also present in Quebec and a merger with Lafarge would create a giant in the province. Other players are Colacem and Ciment Québec.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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