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Editorial comment

The proposed merger of Holcim and Lafarge was the biggest news story in the cement industry last year. After the initial shock was over, talk immediately turned to who would get what when the necessary assets were divested to get the merger past regulators. In recent weeks, that question has been answered, with the announcement that Irish building materials company CRH has agreed a e6.5 billion acquisition deal. This deal – thought to be the largest ever acquisition by an Irish company – would make CRH the world’s third largest building materials supplier. That’s quite a leap from its previous position way outside the top ten.Driving this huge acquisition is CEO Albert Manifold, who reportedly told journalists that the deal was just ‘too good to turn down’. Manifold took over as CEO in January 2014 and soon announced a multi-year divestment programme that proposed e1.5 – 2 billion in divestments. The idea was not only to trim costs, but also to refine the group’s focus and so alongside divestments amounting to e0.35 billion in 2014, the group also spent e0.19 billion on acquisitions. In this latest deal, the majority of the assets – some two-thirds – are within Europe, where CRH already has a leading presence. The new units will fit well within CRH’s existing portfolio (and according to media speculation, those that don’t – or that would cause competition complications – will be offloaded to private equity house KKR). CRH will also be able to extend its reach in Asia, where it currently has operations in India and China, and enter South America. The response to the deal announcement was mixed. Shares rose, so clearly investors were pleased, but some analysts voiced their concern that the firm had overpaid, pointing out that the majority of the assets are in Europe, where cement demand is suffering from a depressed construction industry. However, recently released figures from the European Commission give us some basis for optimism. The figures state that average production in construction in 2014 increased by 2% in the euro area and by 3% in the EU28. Unfortunately, the positive performance was by no means universal; CRH will be acquiring assets in both ‘winning’ and ‘losing’ markets. For example, it will acquire Lafarge’s assets in Romania, which saw a 15% increase in production in construction in 2014, and in the UK, which saw a 4.7% increase. On the flip side, CRH is also acquiring assets in France, which saw a 7.5% decrease, Germany (down 4.7%) and Slovakia (down 9.8%). We will have to wait and see what 2015 brings. Could lower oil prices free up funds for much-needed infrastructure projects?Construction statistics aren’t generally featured in World Cement, but it is an area we cover on our website, www.worldcement.com. Join us there and on Twitter, Facebook and LinkedIn for the latest news and industry trends.


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