The world's two largest cement makers, France's Lafarge and Holcim of Switzerland, have agreed the terms of a merger that would create a company with a market value of around $55 billion, a source close to the deal said on Sunday.
Such a merger, achieved by Holcim buying Lafarge, would be the industry's biggest-ever tie-up and create an entity with combined sales of over $40 billion, raising the likelihood it will draw extra scrutiny from global competition watchdogs.
The boards of Lafarge and Holcim approved the proposal on Saturday and are due to announce it on Monday, the source said. The two groups have already begun to address possible competition concerns that would arise, the source added.
"The boards met yesterday and approved the proposal," the source said. "An official communication is due on Monday."
Lafarge declined to comment. Holcim was not immediately available for comment. Both firms are likely to be counting on support from major shareholders. More than a third of Lafarge stock is own by two investors who are represented on its board.
The two companies had already issued statements on Friday announcing they were in advanced talks to merge, a deal which would help them slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector since the 2008 economic crisis.
Their share-price levels jumped to four-year highs on the news, lifting the entire cement sector. A merger would take out spare capacity and help consolidate the market, analysts said.
The terms of the transaction, reported by French newspaper Le Figaro and confirmed by the source, will see Holcim launch a public takeover for Lafarge payable in shares. If successful, the combined firm will be based in Switzerland but will have operational headquarters in Switzerland and France.
Lafarge Chief Executive Officer Bruno Lafont will become CEO of the combined entity while the chairman will be Swiss.
Investment-bank Rothschild and boutique firm Zaoui & Co - helmed by veteran deal-making brothers Michael and Yoel Zaoui - are advising Lafarge, while Goldman Sachs is advising Holcim, according to two sources close to the deal.
Holcim and Lafarge are close in size, with the former's market capitalisation at $30 billion and the latter's at $25 billion. They each have an enterprise value - which includes debt as well as equity - at around 10 times earnings before interest, tax, depreciation and amortisation (EBITDA).
However, in share-price terms, Lafarge enjoys a more