Lafarge has agreed to buy Orascom Cement for €8.8 billion ($12.9bn; £6.32bn) to boost its exposure to high-growth emerging markets, where the French cement giant expects to make two thirds of its earnings.
The deal will result in savings of more than €150 million a year by 2010 and give Lafarge a leading position in the Mediterranean region and the Middle East, where oil and gas revenues have fuelled a boom in construction.
Nassef Sawiris, the majority shareholder of Orascom Cement's parent company, Egypt's Orascom Construction Industries (OCI), will buy an 11.4 per cent stake in Lafarge at €125 a share, the groups said today.
This represents a 16 per cent premium to Lafarge's closing share price on Friday. Orascom will also get two seats on Lafarge's board.
Lafarge shares surged 13.3 per cent to €121.99 by 12.30am, their highest level since early August. Orascom shares reached an all-time high of 600 Egyptian pounds before retreating around 5 per cent to £520.
Analysts also welcomed news that Groupe Bruxelles Lambert, the investment company of billionaire Albert Frere and Lafarge's biggest shareholder, will also join Lafarge's board of directors. Lafarge said GBL would have three seats.
Lafarge will finance the acquisition with €6 billion of debt. It will also raise €2.8 billion in equity by issuing 22.5 million new Lafarge shares to Sawiris. Lafarge also said that as part of the acquisition, it would take on €1.4 billion of debt.