Lafarge’s CEO Bruce Lafont. Credit: Photothèque Lafarge / Roberto Frankenberg

French building materials group Lafarge has acquired Orascum Construction Industries Cement Group, “Orascom Cement” in an €8.8 billion (£6.3 billion) cash-and-shares deal.

Aimed at boosting its exposure to high-growth emerging markets, the takeover will lead to savings of more than €150 million a year by 2010, and will secure Lafarge a leading position in the Middle East, where oil and gas revenues have helped to fuel a construction boom.

The deal represents a major breakthrough in Lafarge’s cement strategy – Orascom Cement is a highly profitable cement leader in emerging markets, most notably in the Middle East and the Mediterranean Basin.  It has a cement capacity of 35 million tons in 2008, increasing to 45 million tons in 2010, with state-of-the-art assets.
At a price of €8.8 billion for 100% of Orascom Cement, with an assumption of €1.4 billion in net debt, the deal was financed through €6.0 billion of debt and the issuance to Nassef Sawiris – majority shareholder with his family of Orascom Construction Industries – of 22.5 million new Lafarge shares at €125 per share (€2.8 billion), making him a 11.4 per cent shareholder in Lafarge.

Bruno Lafont, Lafarge’s chief executive, said: “This acquisition of a leading Egyptian group is a decisive opportunity to accelerate our profitable growth strategy in cement in emerging markets. As a result of the transaction, 65% of Lafarge’s earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to be generated in emerging markets by 2010, relative to 45% in 2007.

“Orascom Cement’s positions are concentrated in a fast-growing region that will fully benefit from the boom in oil and natural gas revenues. The two companies are wholly complementary geographically with considerable potential for synergies. We will create a powerful operational regional center in Egypt.”

At the announcement, Lafarge’s Paris-listed shares surged 13% to €121.75, pleasing investors greatly.