By: Sakthi Prasad --
08 April, 2014
Switzerland's Holcim had agreed to buy France's Lafarge to create the world's biggest cement maker with billions of dollars in revenue.
Lafarge is at the forefront of innovation and has filed about 160 patents in 2013 alone. The new entity is expected to be a force to reckon with in cement production technology.
In markets such as France, Brazil, Canada and Morocco, the combined cement production capacity will exceed 50% of the market share.
The combined entity will begin selling their assets worldwide in order to clear regulatory hurdles.
Major asset disposals are expected to be centred in Europe, while the companies would retain as much assets as possible in emerging markets, according to Beroe's Rita Williams.
The other three major cement players such as Mexico's Cemex, Germany's Heidelberg and China's Anhui Conch may end up buying some of the divested assets from the merger. In fact, there is a possibility that they may also seek to form similar "merger of equals" so as to remain competitive.
Beside the big actors, smaller players would also end up bidding for some of the valuable assets. This should help strengthen their competitive position and product offerings.
Cement is one of the primary inputs in the construction industry. And after the Lafarge-Holcim merger, category managers in charge of construction will face a highly consolidated global supply market, which would be dominated by four major players.
However, such consolidation won't have much of an impact on procurement as cement markets tend to be geographically small with an average radius of about 300-400 miles. And since cement is always bought from the local market with few suppliers, category managers in charge of construction won't feel much of a pinch.