Aggregates Manager

May 2014

Aggregates Manager Digital Magazine

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AGGREGATES MANAGER May 2014 3 by Therese Dunphy, Editor-in-Chief A MERGER OF A s we wait for Martin Marietta's acquisition of Texas Industries to clear regulatory approval, another industry merger is set to change the face of the construction materials market — both domestically and globally. On April 7, the leadership teams at Holcim and Lafarge announced plans for a "merger of equals." According to a joint press release issued the day of the announcement, the combined company, known as LafargeHolcim, "would have an enhanced presence in the global building materials sector with a number one position globally across cement, concrete, and aggregates and new opportunities to optimize production and commercial networks." Weeks prior to the announcement, each company released its 2013 annual business results. Combined, the two companies produced or sold 275.7 million tons of cement and 346.3 million tons of aggregates. In terms of domestic production, U.S. Geological Survey rankings of U.S. aggregate producers recently listed Lafarge North America Inc. as the sixth largest U.S. producer, while Holcim Group/Aggregate Industries fell just below as the seventh largest producer. Those ratings are based on 2012 production. Since that time, Lafarge has steadily divested a number of its aggregate operations. • In September 2012, it sold cement, concrete, and aggregate assets in Missouri and Oklahoma to Eagle Materials for $446 million. • In January 2013, it sold six quarries in Georgia for $160 million. • In June 2013, it sold its North American Gypsum subsidiary to an affiliate of Lone Star Funds for $700 million. • In January 2014, it sold five quarries and related assets in Maryland to Bluegrass Materials for $320 million. The aggregate assets retained by Lafarge are largely centered around the Great Lakes region, where there is little overlap with Holcim's aggregates operations. To clear antitrust hurdles, the companies say they plan to sell additional assets valued at approximately $6.9 million, but two-thirds of those divestments are likely to occur in Europe. While production — particularly cement — will likely remain over capacity as assets are sold to competitors to avoid market monopolies, the combined company touted its ability to offer best-in-class R&D, and this might be the deal's biggest impact on the construction materials industry. The Economist reports that the two companies "reckon they have enough firepower to make cement less like a commodity and their business more like a service." By offering high-margin products and consultative services to construction firms, it says, LafargeHolcim "may prove far more profitable than just selling cement by the bag." Product differentiation is an area currently being explored by aggregate, as well as cement, producers. If this "merger of equals" moves construction materials away from the commodity mindset, it may prove of value to the industry as a whole. May 2014 Vol. 19, No. 5 /AggregatesManager @AggMan_editor Editorial Editor-in-Chief: Therese Dunphy Editorial Director: Marcia Gruver Doyle Online Editor: Wayne Grayson Online Managing Editor: Amanda Bayhi Design & Production Art Director: Sandy Turner, Jr. Production Designer: Timothy Smith Advertising Production Manager: Linda Hapner Construction Media Senior VP, Construction Media: Dan Tidwell VP of Sales, Construction Media: Joe Donald 3200 Rice Mine Rd NE Tuscaloosa, AL 35406 800-633-5953 Corporate Chairman/CEO: Mike Reilly President: Brent Reilly Chief Process Officer: Shane Elmore Chief Administration Officer: David Wright Senior Vice President, Sales: Scott Miller Senior Vice President, Editorial and Research: Linda Longton Vice President of Events: Alan Sims Vice President, Audience Development: Stacy McCants Vice President, Digital Services: Nick Reid Director of Marketing: Julie Arsenault For change of address and other subscription inquiries, please contact: Aggregates Manager TM magazine (ISSN 1552-3071) is published monthly by Randall-Reilly Publishing Company copyright 2014. Executive and Administrative offices, 3200 Rice Mine Rd. N.E., Tuscaloosa, AL 35406. Subscription rates: $24 annually, Non-domestic $125 annually. Single copies: $7. We assume no responsibility for the validity of claims of manufacturers in any advertisement or editorial product information or literature offered by them. Publisher reserves the right to refuse non-qualified subscriptions. Periodical circulation postage paid at Tuscaloosa, Alabama and additional entries. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by an information storage retrieval system, without written permission of the copyright owner. POSTMASTER: Send all UAA to CFS. (See DMM 707.4.12.5); NON-POSTAL AND MILITARY FACILITIES: send address corrections to Aggregates Manager, 3200 Rice Mine Road N.E., Tuscaloosa, AL 35406. Equals

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