Lafarge to merge African units in effort to rival Dangote Cement

French cement maker Lafarge is pushing through a deal to consolidate some of its holdings in Africa to create a $3 billion (Sh260 billion) unit headquartered out of Nigeria.

Subsidiaries in Nigeria and South Africa are to be merged to create Lafarge Africa Plc before the end of the year. The consolidation will help Lafarge accelerate growth on the continent and expand its product offering in South Africa and across the region, the cement maker has said.

The move is seen as a response to aggressive expansion by Dangote Cement.

The deal, which now needs regulatory approval, will see Nigerian unit Lafarge Wapco pay the Lafarge Group $200 million in cash and 1.4 billion in new shares to buy Lafarge's South African unit and its other Nigerian businesses in order to combine them.

Lafarge Wapco shareholders approved the $1.35 billion deal on Wednesday combining the Nigerian businesses with Lafarge's wholly-owned South African subsidiary.

Lafarge Group will own 73 per cent of the new combined entity, Lafarge Africa Plc, which will be listed on the Nigerian bourse with a market capitalisation of around $3 billion.

Lafarge faces intense competition in Africa, especially from arch rival Dangote Cement, owned by Africa's richest man, Aliko Dangote. The company, Nigeria's biggest with a market capitalisation of around $24 billion (Sh2.1 trillion), is set to roll out cement plants across Africa.

This includes a plan by Dangote to build a $600 million (Sh52 billion) plant in Kitui County to produce at least three million tonnes of cement a year.

READ: Dangote signals shake-up with new cement plant plans

In Kenya, Lafarge holds a 58.6 per cent stake in Bamburi Cement, the country’s largest cement maker, and 41 per cent of East African Portland Cement, which is third largest.

READ: Lafarge denies dominance in Kenya's cement market

Analysts at Renaissance Capital maintained a buy recommendation on Lafarge Wapco but said the deal could dilute existing shareholders.

“We favour the acquisitions of Unicem and Ashaka Cement, but take a negative view on the inclusion of Atlas Cement and Lafarge South Africa at the indicated price,” they said.

Lafarge owns 60 per cent of Lafarge Wapco, its listed subsidiary in Nigeria, 58.6 per cent of another Nigerian listed company Ashaka Cement Plc, and 100 per cent of Atlas Cement. It has joint ownership with Holcim of privately held United Cement Company of Nigeria.

It owns 100 per cent of the Lafarge South African business.

The Paris-based company is itself in the process of merging with Switzerland-based Holcim, the world’s largest cement maker. To win approval for the $50 billion merger, officials revealed this week, the two firms will sell off close to $4 billion worth of plants and operations.