The European Commission has given its approval for the Lafarge Holcim
merger and the transaction should be completed during the first half of 2015.
This was confirmed in December by Bruno Lafont, the CEO of Lafarge, who will be
taking over operational management of the new group based in Switzerland.
However, it's very strange that virtually nobody is now talking about an
issue that was the subject of extended debates at Lafarge's last General
Meeting of 2014. Many individual shareholders expressed their frustration, and
more, about the merger.
The head office of the new group will be based in Switzerland given that
Holcim launched a takeover bid for Lafarge, an operation that will lead to the
disappearance of the Lafarge listing if more than 95% of shareholders approve
the merger.
Individual shareholders generally hold their shares in a PEA (equity
savings plan) which protects them from the new, and very high, taxes on direct
holdings. If the merger is agreed with more than 95% of the votes, they will
become shareholders of the Swiss company and will no longer be able to hold
their shares in a PEA (rules geographically limit holdings of non-French shares
to the European Union).
During the General Meeting, several individual shareholders asked Mr
Lafont if he intended to ask the government to make changes to the rules. This
seems unlikely given the current environment...
Paradoxically, individual shareholders have expressed their frustration
at having always supported the Lafarge group through difficult periods and at
now finding themselves compelled to sell their shares with the merger. There
will be no point in holding Swiss shares in the future given the tax rules that
will be applicable then...
One of our leading French companies, which was a symbol for many years thanks
to its special relationship with its individual shareholders will now, via a
"merger among equals" become a Swiss company with virtually no
individual French shareholders…unless they vote against the Lafarge Holcim
merger, obliging Lafarge to be listed in France if more than 5% of its
shareholders remain.
The Board of Directors clearly didn't take into account the historical
ties between individual shareholders and the company for this merger. It chose
to give priority to a solution based on optimising the interests of certain
shareholders who are not impacted by the tax effects...
This is a shame and our only recourse is to call for a vote against the
merger to ensure that there will still be Lafarge shareholders, even if over
70% of the company is held by the Holcim group.
Let's hope that many French institutional shareholders will support this
approach. It's important that individual shareholders not be called upon only
when absolutely necessary and it's also important to protect their proprietary
interests. Otherwise, what is the point of seeking individual shareholders?
France needs individual shareholders to reinvest in its companies and
the Lafarge case will discourage them from doing so. We need to react now!
Olivier de Guerre
Chairman of PhiTrust Active Investors
