The official line about the proposed merger between huge concrete-makers Holcim and Lafarge is that it is about creating a European powerhouse that can compete on the world stage. But it is also about a family keeping control of its business, and suggests yet another reason that policy-makers should like family ownership.
Swiss firm Holcim’s biggest shareholder with 20% of the stock is Thomas Schmidheiny and his family, which founded the firm in 1912. France’s Lafarge was family-founded and long since floated, but two of its biggest shareholders are Albert Frere, the Belgian tycoon who is head of a family investment company, and Egypt’s richest man Nassef Sawiris, whose father founded the Orascom conglomerate. They respectively own 21% and 15% of the shares. So the family ethos in both firms is strong.
It is probably fair to say that the Holcim/Lafarge merger, which was first mooted early last year, is not the smoothest ever. Yes, it would create the world’s biggest cement-maker – “The industrial logic of the deal is undisputed,” said Schmidheiny – but it also fell foul of competition rules in 15 countries and only got the green light after the companies agreed to sell off businesses worth billions of euros. Now shareholders are complaining because Holcim is outperforming Lafarge, making the agreed one-to-one share swap deal unpalatable.
And yet Schmidheiny et al are ploughing on. Why? Because the deal is about more than a headline-grabbing €41 billion mega-merger. According to advisers in Switzerland it is all about the long-term desire of the families involved, and especially the Schmidheinys, to hold on to their assets. For them, that trumps any short-term discomfort or squealing from smaller shareholders.
What worries the Schmidheinys is secretive Russian oligarch Filaret Galchev building up his stake in Holcim to around 11%, making him the second-largest shareholder. Galchev backs the merger because he would be able to hoover up some of the new company’s divested assets.
You might see the merger as a cynical, anticompetitive move by old families to protect vested interests against a newcomer. On the other hand, Western governments should take note. Many Europeans feel uncomfortable with businesses being bought by foreigners, but the logic of maximising shareholder value makes them powerless to prevent it happening. The Holcim-Lafarge deal shows that one benefit of family ownership is that families can have the power, and the desire, to keep raiders out.