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Lafarge major shareholder says talks with Holcim on track

(Adds details)

By Gilles Guillaume and Leila Abboud

PARIS, March 19 (Reuters) - Talks to save the Lafarge (Paris: FR0000120537 - news) -Holcim cement mega-merger are "progressing well" and will not fail, a key Lafarge shareholder said on Thursday, joining the French firm's beleaguered boss in insisting it must remain a merger of equals.

Three days after news broke that Switzerland-based Holcim wanted to renegotiate terms, the parties were still locked in talks about who should be in top management positions.

"What is being discussed now, with the support of both boards and all key shareholders, is to restore a transaction that is to the letter of the word a merger of equals," said Nassef Sawiris, the second-biggest shareholder and board member in a telephone interview.

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An accord could be announced as early as tonight, said several sources on Thursday, but the talks could also break down.

Meanwhile Lafarge Chief Executive Bruno Lafont told an internal meeting of about 60 executives on Thursday that he still wanted the merger to go ahead, said a source familiar with the situation.

"I want this merger to take place and to succeed widely fuelled by the strength of Lafarge," Lafont told the group.

"I will not let cheap tricks jeopardize the introduction of a unique group in our industry."

It was not clear what Lafont was referring to but the past days have seen him criticised in media reports for his brash management style and ability to deliver on 1.4 billion euros of promised cost savings from the merger.

Lafarge and Holcim (Other OTC: HCMLF - news) agreed to create the world's biggest cement firm almost a year ago in a tie up that made Lafont the CEO and offered a 1-for-1 share exchange ratio with seven board members to come from each side.

But Holcim shareholder discontent has grown this year as the companies earnings outlooks diverged, and the conflict broke into the open on Monday.

Holcim said it was contesting the deal terms and the leadership of the new firm and said it would not go forward if the share exchange ratio and governance were not revised.

Lafont's planned nomination as chief executive of the new company has become unacceptable for the Swiss, sources said.

In his address to the assembled country managers, Lafont also said that balanced governance between the two sides was necessary in order to deliver on the promised merger of equals that the deal was supposed to be.

Negotiations were focused on making Lafont the co-chairman alongside Wolfgang Reitzle, the current chairman of Holcim, sources said on Wednesday.

Sawiris declined to comment on the ongoing negotiations.

"As a shareholder I am supporting a transaction where Bruno Lafont plays a major role in new entity, and I believe that Holcim is of the same mind," he added.

"The CEO will be Lafont's handpicked successor," he said, refusing to say who it would be.

Sawiris owns 16 percent of Lafarge that he acquired when the French group bought his family's cement group Orascom in 2007.

Holcim shares were up 1.1 percent to 75.85 euros at 1402 GMT, while Lafarge's were down 0.3 percent to 62.48 euro.

(Editing by Andrew Callus)