Lafarge SA to merge with Holcim in bid to compete with Dangote Cement

Aliko Dangote – Founder, Chairman and CEO of the Dangote Group

The construction boom on the African continent continues to attract more businesses.

Lafarge SA, the French cement maker is moving to merge with Holcim Ltd. of Switzerland to become one of the world’s bigger producer of the building material. The company plans to combine its Nigerian and South African assets to form a new company to compete with Africa market leader Dangote Cement Plc.

The entity will be known as Lafarge Africa Plc., and be listed on the Nigerian stock exchange. The business will have cement production capacity of 12 million metric tons and had a combined revenue of US$1.25 billion in 2013.

The deal “is aimed at responding to its more aggressive rival, Dangote Cement, and to consolidate its positioning as a leading cement firm.

Lafarge, which has operations in 64 countries, has been adding capacity in Africa to take advantage of the rapidly growing demand for new infrastructure in the developing economies and to offset a construction slump in Europe. The company is competing against Lagos-based Dangote, which is rapidly expanding across the continent.

Dangote Cement, controlled by Africa’s richest man Aliko Dangote, plans to have capacity of more than 60 million tons in 2016.

Lafarge is at loggerheads with Nigerian regulators after its preferred 32.5 grade cement was deemed unsafe for anything other than plastering. Only 42.5 grade cement – a market controlled by Dangote – may be used for columns and slabs, the Standards Organization of Nigeria said last month. There are several impending court actions challenging the ruling, Lafarge said June 2.

Dangote cement has attracted a lot of attention on the African continent with acquisitions, which enabled it to source funds and build capacity. Some of that attention may now be shifted to Lafarge Africa.