Lafarge announces friendly bid for Blue Circle

8 January 2001

Bertrand Collomb, Chairman and Chief Executive Officer of Lafarge, has announced a bid to acquire the portion of Blue Circle's equity that the Group does not already own (77.4% of equity, i.e. 490 million shares).

This offer has been approved by the Blue Circle Board of Directors, which has decided to recommend it to shareholders. It is subject to the necessary financial arrangements being put in place and to approval being granted by competition authorities, and should be completed by the summer of 2001.

The acquisition of Blue Circle, the world's 6th largest cement maker, establishes Lafarge as the world number one producer, with capacity of roughly 150 million tonnes, an increase of almost 40%, and strengthens its positions in every geographic zone, particularly in emerging countries.

"The exceptional geographical compatibility of our two groups and the opportunity that this provides to take part in the worldwide concentration of our sector finally brought us together," said Bertrand Collomb, Chairman and Chief Executive Officer of Lafarge. "Lafarge has already demonstrated its capacity for integration, and we now look forward to welcoming Blue Circle teams, who will be able to make a contribution to our future successes."

Unchanged investment

Lafarge is offering Blue Circle shareholders 495 pence per share for the 77.4% of equity remaining, which amounts to a total price of € 3.8 billion (£2.4 billion).

This acquisition will be funded by a preferential rights issue for approximately € 1 billion to be launched by Lafarge in January 2001 and by an increase in indebtedness of € 2.8 billion.

Taking into account the shares already held by Lafarge (22.6% of the equity), the exceptional dividend paid to shareholders by Blue Circle and reductions made by Blue Circle in the number of shares on the market, the operation represents a total investment of € 7.4 billion, unchanged by comparison with the offer of April 19, 2000.

A € 1.5 billion asset disposal programme will be undertaken over the next 18 months. This will primarily concern Blue Circle assets – industrial installations mainly in North America, and real estate mostly located in the United Kingdom.

Significant synergies

Synergies representing approximately € 100 million annually will be achieved within the space of two years. These will be in addition to those that can reasonably be expected to arise from Blue Circle's performance improvement programme.

Synergies will be generated by reductions in corporate overheads costs, operational synergies in countries where both groups are active, and the optimisation of purchasing and networks.

A strong value creating acquisition

The operation will have a highly positive impact on Lafarge's financial results, with income per share rising at least 10% before goodwill as early as 2002.

The improvement of the financial structure will result from generation of larger cash flows and from the asset disposal programme. The Group will maintain its capacity to finance growth of around € 1.2 billion per year. Lafarge will see a return to its current debt-to-equity ratio by 2003.

A decisive step in Lafarge's development

"Through this substantial acquisition, we are achieving a historic step in our cement leadership, the keystone of our leadership in building materials," stated Bertrand Collomb.

Lafarge recorded sales of € 10.5 billion in 1999 and today employs 66,000 people in 70 countries. The Group is world leader in building materials, and its principal businesses consist of Cement, Aggregates & Concrete, Roofing and Gypsum.

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