April 8 (Bloomberg) -- The executives and advisers who brought together Lafarge SA and Holcim Ltd. to build the world’s largest cement company spent six months criss-crossing Europe to win the approval of three billionaires crucial to the deal, according to people familiar with the situation.
Talks began in October, the people said, the second time in 18 months executives tried to put together a transaction. Negotiations took place in London, Paris, Zurich, Brussels and Strasbourg, said the people, asking not to be identified discussing a private matter. That travel itinerary gave the deal its codename: Project Cities, one of the people said.
If successful, the merger will create a company with about $40 billion in annual sales and operations worldwide, just as construction begins to recover from the global financial crisis. The cement industry has been running some of its kilns at a loss since 2008, as waning demand for real estate held back construction in Europe and the U.S.
Several of the world’s richest people are investors in Holcim and Lafarge, and winning their support was key to making the deal happen, the people said. They include Nassef Sawiris, Egypt’s richest man and the owner of more than 15 percent of Paris-based Lafarge; Albert Frere, whose Groupe Bruxelles Lambert owns 21 percent, and Thomas Schmidheiny, who owns 20 percent of Holcim, based in Jona, Switzerland.
The trio was intimately involved in the negotiations and supportive from the start, the people said.
Schmidheiny is fully behind combining Holcim, the company founded by his family and which he led for more than 20 years, with its French competitor, the billionaire’s spokesman, Joerg Denzler, said by telephone.
“The deal means that Holcim loses its family touch slightly,” Denzler said. “The world changes. We will create a real game changer.”
A small group of advisers worked alongside the billionaires: advising Lafarge were Rothschild bankers as well as Michael and Yoel Zaoui, the brothers and former Morgan Stanley and Goldman Sachs Group Inc. dealmakers, while Goldman Sachs advisers represented Holcim, they said.
The negotiating teams, which began working on details of the deal in January, were kept small to minimize the potential for leaks, the people said. That secrecy held until about 72 hours before the planned April 7 announcement, when Bloomberg News reported the discussions, sending shares of both companies upward.
The merger faces a tough battle with antitrust regulators. Holcim and Lafarge are already the world’s two largest cement manufacturers, with especially strong positions in Europe. Their pitch to governments, the people said, will include emphasizing the benefits of creating a so-called European champion capable of competing globally, and promises to avoid job cuts.
The companies’ attempt to come together about 18 months ago failed amid shareholder disputes over the shape of the future company, one of the people said.
More benign market conditions and a rebounding global economy helped bring together an agreement this time, two of the people said.
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