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JOHANNESBURG (miningweekly.com) – Diversified mining major Anglo American on Monday said it planned to sell its 50% interest in the Lafarge Tarmac joint venture (JV) to cement producer Lafarge for £885-million.
Lafarge Tarmac, formed in January 2013, is a 50:50 JV between Lafarge and Anglo American’s construction materials and services businesses in the UK.
Anglo American’s 50% interest in the JV’s gross assets was £1.4-billion, including goodwill, as at December 2013.
The transaction, for which an in-principle agreement had been signed, remained subject to the conclusion of the Lafarge/Holcim merger, which was expected in the first half of 2015.
“Lafarge intends to offer a full divestment of the [Lafarge Tarmac] JV to the European Commission as a remedy for the UK market in respect of the proposed merger of Lafarge and Switzerland-based Holcim,” Anglo American said in a statement, noting that it was a condition of the sale of its interest in the JV that the divestment of Lafarge Tarmac was accepted as a suitable remedy.
Lafarge and Holcim were expected to embark on a series of asset sales across Europe in order to obtain regulatory approval for their merger, which was first announced in April and which would lead to the creation of a cement giant with a yearly turnover of $44-billion.
The deal between Anglo American and Lafarge remained subject to regulatory approval, with the parties expecting to finalise the terms of a definitive agreement in the third quarter of this year.
Liberum Capital said that should the disposal be completed, it will be a useful source of cash, given that Anglo American's gearing levels were expected to reach 50% or over $15-billion in net debt by 2015.
The proceeds of the transaction, which would be paid in cash, on a debt and cash free basis, would be used by Anglo American to pay down debt.
“Aside from this proposed transaction, Anglo American expects to receive additional cash proceeds of between £57-million and £67-million as a result of prior transactions involving the formation of the JV and the transfer of Tarmac Building Products assets to the JV,” the company pointed out.
"However, there are significant hurdles for the merger to clear from a competition perspective and is by no means a certainty. Holcim and Lafarge are already under a cartel investigation on cement since December 2010 that could result in a fine as much as 10% of global revenues. The Tarmac JV will likely have to be floated due to the concentration in the market," Liberum said in a statement.