The companies are exploring a merger of equals that would build on their “strengths and identities,” Jona, Switzerland-based Holcim and Lafarge said yesterday. Paris-based Lafarge rose 8.9 percent while Holcim gained 6.9 percent in Zurich.
A deal would let the two producers cut costs by combining operations as some of the industry’s kilns run at a loss after the recent global recession eroded demand. To improve returns from energy-gobbling plants, Holcim in August agreed to swap assets in Germany and the Czech Republic with Monterrey, Mexico-based Cemex SAB , the biggest cement maker in the Americas.
There is still massive oversupply in the industry . A deal would help Holcim and Lafarge to cut a lot of costs and dominate a few more markets.
An acquisition spree before the financial crisis, including Lafarge’s 10.2 billion-euro purchase of Orascom Cement in 2008 and Holcim’s $4.1 billion deal for Aggregate Industries in 2005, widened the dominance of both companies.