Lafarge as of 31 December 2006 is the World

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Lafarge as of 31 December 2006 is the world’s largest On 1st February 2000 the French company Lafarge announced for the second time in a year a public bid for the U.K.company Blue Circle Industries, after a failure the previous year. At the moment Lafarge was trapped as it owned 22.6% of Blue Circle as a result of its earlier bid and the stake was too large to be absorbed by the market and yet too little to influence the company. In December 1999 Bertrand Collomb, Lafarge CEO, said the French g
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    Lafarge as of 31 December 2006 is the world’s largest On 1 st February 2000 the French company Lafarge announced for the second time in a year a publicbid for the U.K.company Blue Circle Industries, after a failure the previous year.At the moment Lafarge was trapped as it owned 22.6% of Blue Circle as a result of its earlier bidand the stake was too large to be absorbed by the market and yet too little to influence the company.In December 1999 Bertrand Collomb, Lafarge CEO, said the French group would seize any oppor-tunity to pursue a purchase of the rest of the company. Playing an active part in the movement towards worldwide consolidation in our industries, we launched a takeover bid early in 2000 for the world’s sixth largest  cement producer, the British group, Blue Circle Industries.At the price we offered, our bid failed to attract the majority of shares, but wenonetheless succeeded in acquiring a stake of roughly 20% in the equity of thecompany. It became possible for us to re-open discussions with Blue Circle towards the end of 2000, and early in 2001, a new bid was accepted by the company’s  Board of Directors and its shareholders. Expressed in euros, the cost of the operationhas not increased for Lafarge and its shareholders by comparison with the  previous year’s bid. This is a major acquisition, which will increase the size 4 of the Group by more than a third and generate a significant improvement inprofits. It is expected to be finalised during summer 2001, and the integration of Blue Circle should be completed by the end of the year. The acquisition of Blue Circle will make Lafarge the world’s largest cement producer.  Its activities in Aggregates & Concrete, Roofing and Gypsum confirm itas world leader in building materials.  LaBoth companies are active world-wide in the building materials sector,which includes grey and white cement, aggregates, ready-mix concrete, roofing tiles,pre-cast concrete and other products. T HE L AFARGE SHARE The price of the Lafarge share experienced a disappointing trend in 2000, markedby the failure of the takeover bid for Blue Circle Industries PLC and accentuatedby reference to the high prices recorded at the end of December 1999. It closedthe 2000 financial year at  € 89.30 (or  € 87.40 after adjustment relating to thedetachment of the preferential rights issue operated in February 2001. SinceJanuary 1, 2001, the trend has been favourable, particularly since the positivereception on the market of the bid to acquire Blue Circle Industries PLC. Thedaily volume of Lafarge shares traded on the Paris Stock Exchange increasedover 1999 levels, reaching an average of 521,670 shares changing hands. Theshare was ranked in 23rd place in the CAC 40 index for volume of transactions,and the amount of share capital traded daily was over  € 45.5 million.The most significant chargeswere the costs relating to the initial bid for Blue Circle Industries PLC in 2000,being  € 91 million   ◗ World leader in building materials, Lafarge holdstop-ranking positions in all four of its Divisions  –   Cement, Aggregates & Concrete, Roofing and Gypsum. ◗ In 2000, the Group reported sales of €12.2 billion,  and today, with 66,000 employees, it operates inmore than 70 countries.  a) Cement7. Grey cement is one of the two ingredients of concrete products. In previous decisions theCommission has found grey cement to be a separate product market, within whichdifferent types of cement are largely interchangeable. Its investigation in the currentcase has confirmed that market definition is appropriate for the purpose of assessing thecurrent transaction. From the geographic point of view, the Commission has consideredthat the cement market may be seen as a set of markets, centred around the variousfactories, overlapping one another and covering the whole of Europe. The size of eachmarket and the extent of overlap are determined by the distance from the factory atwhich cement may be sold. While transport by road is expensive, rail transport is lessso and cement can be transported considerable distances by sea at reasonable cost.However, the notifying party considers that the geographic markets for cement arenational. It is not necessary to decide the issue in the present case since even on thebasis of national markets the operation does not give rise to serious concern.8. The notifying party argues that white cement constitutes a separate product marketfrom grey cement because it is used for different purposes, is produced in much morelimited quantities,and is significantly more expensive; they argue that the relevantgeographic market is at least EEA-wide since it is produced in a limited number of Member States from which it is shipped throughout the EEA and beyond. The Commission’s investigation has confirmed t hat these market definitions are appropriatefor the purpose of assessing the current transaction.b) Aggregates9. Aggregates are the second ingredient of concrete products.In previous decisions the Commission has found aggregates (gravel, crushed rock,sand) to constitute a single, separate product market. It has found the relevantgeographic market to be local, in view of significant transport costs. There is evidenceto suggest that in practice the maximum area over which aggregates can beeconomically delivered from a production site is defined by a 30-mile radius from thesite.c) Ready mixed concrete10. In previous decisions the Commission has found ready mixed concrete to be a separateproduct market. It has found the relevant geographic market to be local, since the  perishable nature of such a ‘wet’ product constrains the distance over which it can be  delivered before use; in practice the maximum area over which ready-mix concrete canbe economically delivered from a ready-mix plant is generally regarded as defined by a10-mile radius from the plant. 3 d) Pre-cast concrete products11. Lafarge produces only building blocks and paving blocks, and argues that the relevantgeographic market is national in scope, which is in line with previous Commissiondecisions.e) Concrete roofing tiles 12. The Commission’s investigation has shown that concrete roofing tiles constitute a  distinct product market, and that the relevant geographic market is national in scopeOn 8 th January 2001 the French company Lafarge announced an agreed bid for the U.K.company BCI. Both companies are active world-wide in the building materials sector,which includes grey and white cement, aggregates, ready-mix concrete, roofing tiles,pre-cast concrete and other products.  Lafarge already owns 22.6% of Blue Circle as a result of its earlier bid and its financial adviser, DresdnerKleinwort Benson has a further 9.8%.  Last month Lafarge chief Bertrand Collomb said the French group would seize any opportunity to pursue apurchase of the rest of the company. Trapped  After failing in its earlier takeover attempt but still left with a substantial stake, Lafarge was effectivelytrapped.The stake was too large to sell - the market would not have been able to absorb it - and yet Lafarge had littleinfluence in the company.  Sources:http://news.bbc.co.uk/1/hi/business/1105144.stm http://www.thebhc.org/publications/BEHonline/2009/barjot.pdf  http://www.lafarge.com/09222004-publication_finance-Annual_report_2000_043001-uk.pdf  
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