Swiss cement giant Holcim has called a halt to its merger with Lafarge, pressing the French company to renegotiate the deal terms and putting their plan to create the world's biggest cement maker at risk.
The deal announced last April was supposed to combine the firms on an equal basis.
But since then diverging results, share prices and a surge in the Swiss franc against the euro have strengthened Holcim's position and led its largest shareholder to press publicly for a revision of the agreement.
"The Holcim board of directors has concluded that the combination agreement can no longer be pursued in its present form," Holcim said in a statement.
It added that it was ready to talk about both the share exchange ratio and "governance issues".
Lafarge said in a separate statement it was willing to consider revising the share exchange ratio but not other aspects of the deal, which was unveiled as "a merger of equals".
Lafarge boss Bruno Lafont was due to become chief executive of the merged company but Holcim wants to change the earlier plan, a person familiar with the situation said.
A top 10 shareholder told Reuters that the board composition was also an issue, since the original plan to divide the seats equally with seven for each side was no longer fair.
Lafarge shares fell 4.5%, making them the biggest loser on the French blue-chip index, while Holcim fell 1% as the two firms' positions cast doubt over the deal.
Shareholders of both groups still had to ratify the deal and some on the Holcim side have been agitating for change, including investor Thomas Schmidheiny, who owns a 20% stake.
The differences between the two companies came to a head during the transition period in which they were seeking competition approvals globally and selling off assets to comply with various regulators' requests.
On 2 February, Holcim and Lafarge agreed to sell a chunk of their European businesses to Irish company CRH to secure approval for the merger from EU competition authorities.
CRH shares fell 4.15% in Dublin trade today on the news that Holcim wanted to renegotiate the Lafarge merger terms.
Approvals for the deal are still needed in India, the US and Canada.
According to a source, Holcim has proposed changing the previously agreed 1-1 share exchange ratio to 0.875 Holcim shares for each Lafarge share, confirming an earlier report from Bloomberg.
Lafarge is said to be planning a counter proposal that would trim its weighting to 0.93 to get the deal done, the source said.
"Lafarge's board of directors remains committed to the project that it intends to see implemented," the French group said today.
Holcim said further details would be communicated later.
Shares in Lafarge and Holcim moved broadly in tandem after the deal was announced but the positive correlation broke down in late February after Holcim reported stronger growth.
Shares in Lafarge are down nearly 8% since then, while Holcim shares are up 0.2% over the same period.
