By Nkiruka Nnorom
THE plan by Lafarge THE plan by Lafarge Africa Plc to merge its operation with United Cement Company of Nigeria Limited, Unicem, and Atlas Cement Company Limited will give the company more competitive edge in the cement industry.Capital market operators and shareholders of the company that spoke to Financial Vanguard said the move, which is awaiting the approval of the Securities and Exchange Commission, SEC, would create economies of scale and size for the company and position it to acquire more market shares in the industry.
Lafarge Africa Plc had said last week that it has received the approval from its Board of Directors to merge with Unicem and Atlas. Lafarge Africa holds 100 per cent equity stake in both companies but they have been operating as separate entities.
According to the company, the merger is part of the transformational journey it started three years ago in 2014.The Chairman, Mobolaji Balogun, explained that the merger of Unicem into Lafarge Africa will bring unique benefits to Lafarge Africa’s capacity and footprint in Nigeria as it provides an opportunity to increase the company’s share of the cement market in the South East and South South regions of the countryHe noted that the merger would ensure that Lafarge enjoys some of the benefits that would be unlocked as a result of the merger of the three entities. “Lafarge Africa acquired 100 per cent on Unicem through its acquisition of Egyptian Cement Company, ECH, and Nigeria Cement Holdings, NCH, two Netherlands entities. “This multi-layer structure created by Unicem’s former owners is not tax effective for Lafarge Africa and accordingly, the Board of Directors has proposed that these two offshore entities be dissolved in order to ensure that Lafarge owns Unicem directly,” Balogun explained.Commenting on the merger,
Mr. Chinenye Anyanwu, Managing Director and Chief Executive Officer, Dependable Securities Limited, said that the coming together of Lafarge Africa and the other companies would bring down the unit cost of production and with that, the company could compete favourably with big names in the cement industry like the Dangote Cement. “If they remain small, they would continue to lose the market to other competitors like Dangote Cement Plc. So, size is the war and that is why they doing the amalgamation across board. It is better to have 10 per cent of a flourishing firm than 100 per cent of a dead firm. If it is flourishing, every stakeholder will be benefited.,” he stated.He said that the company’s market share would improve as a result of the integration of the smaller market shares of all the other companies into Lafarge Africa,
while the marketing drive could increase beyond what it used to be.Also speaking Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said that beyond the merger, the company should look at increasing its production capacity and product availability, saying that those are the major things that would impact earnings and shareholders’ return. He stated: “The merger they are planning can only benefit the company and the shareholders if there is increase in the production lines and sales.”