CRH boosted by continuation of Holcim-Lafarge merger talks

Shares in CRH were higher on Thursday after European cement giants Holcim and Lafarge confirmed merger talks were continuing.

The Swiss and French groups, which have agreed to sell FTSE 100-listed CRH €6.5bn of assets the pair need to offload in order to please competition authorities, confirmed the deal talks were continuing on the same terms.

Holcim shareholders had been said to be unhappy with the terms of the merger, putting the deal in jeopardy.

Media reports said the pair were looking to renegotiate some part of the plan to placate these unhappy investors.

Holcim said in an emailed statement that “the state of affairs currently remains unchanged” as “both companies continue to work on different workstreams to conclude the planned merger”.

Analysts at Jefferies on Wednesday said significant changes in the Lafarge-Holcim merger terms was unlikely, as shareholders on both sides were unlikely to risk losing merger synergies worth 16%-19% of the combined companies' stockmarket value, and potentially cause double-digit percentage share price falls.

"The terms of a merger normally depend more on the longer term potential than the trading outlook over the next few quarters."

Based on the company’s guidance, Lafarge should perform slightly better than Holcim in 2015, which "does not appear to be a compelling argument" for renegotiating the terms of the merger.

"The main argument for renegotiating in our view would be that the oil prices could have moved to a structurally lower level, potentially depressing the longer term profitability of Lafarge’s businesses in the Middle East and Africa, and potentially boosting Holcim’s profitability in India. However, how much confidence can we have in longer term oil price forecasts when shorter term estimates have changed so much in recent months?"