Swiss company Holcim (HOLN.VX) came under pressure on Monday to secure improved terms for its shareholders in a planned merger with France's Lafarge (LAFP.PA) that would create the world's largest cement maker.
Holcim's largest stakeholder, Thomas Schmidheiny, who owns about 20 percent of the company, is demanding a better deal, Swiss weekly SonntagsZeitung reported on Sunday, citing people close to the billionaire.
The companies hope a combination, which would create a business with $44 billion in annual sales, will help them cope better with the overcapacity and sluggish demand that have dogged the construction industry since the 2008 economic crisis.
However, analysts have seen a potential divergence in earnings prospects as opening the possibility of a renegotiation of the deal which is based on each Lafarge share being swapped for one Holcim share.
"Pressure has been building since we first highlighted the rising probability of an adjustment in the merger terms as fourth-quarter results showed company performance diverging further and following the launch of a media campaign voicing discontentment with the deal," Bernstein analyst Phil Roseberg wrote in a note.
According to the SonntagsZeitung report, Schmidheiny sees two possible solutions. One is to change the exchange ratio of shares to favor Holcim investors, rather than being one-for-one. Another is a special dividend.
The paper quoted another board member as saying the deal will not work in its current form.
Holcim declined to comment on Monday, saying only that it was aware of the report.
"The board of Holcim has taken note of press statements about shareholder reactions relating to the commercial terms of the combination," Holcim said in a brief statement.
The deal needs anti-trust clearance in five jurisdictions including India, Holcim's biggest single market, the United States and Canada. A capital increase needed for the merger also needs to be approved by two-thirds of Holcim shareholders at a meeting due in late May or early June.
Baader-Helvea analyst Patrick Appenzeller said Holcim would have to offer shareholders a better deal.
"Why should the Holcim shareholders agree to the deal? It's obviously such a bad deal when you look at the fundamentals," said Appenzeller, who has a "Hold" rating on Holcim shares.
"I expect a 57:43 ratio finally but that will probably only be decided ahead of the shareholder meeting," he said.
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