Issues in transfer of mining rights in 18-20 states, a constraint.
A limitation in transferring mining assets has led to ACC and Ambuja Cements (ACL) from dropping plans to merge their business, at least for the present.
"On the basis of a comprehensive evaluation carried out by both the Special Committee (set up to study the possibility of the merger) and the Board of Directors, the Board is of the opinion that there are present certain constraints in implementing the merger between the company and ACL, said an announcement by ACC.
The two cement majors had proposed the merger in May last year. The combined entity would have had a capacity of 63 million tons, helping parent LafargeHolcim get closer to market leader Ultratech Cement of the Aditya Birla Group. UltraTEch has nearly 70 million tons of annual capacity.
At the same time, ACC clarified that, "The company is therefore not proceeding with the merger at the juncture, though this remains the ultimate objective."
One of the major constraints, sources close to the company told Moneycontrol, related to the transfer of rights of mining assets.
"The current regime on transfer of mineral concessions is still evolving and does not provide for a merger currently. Given the challenges of achieving such transfers across 18 to 20 states, it was found prudent not to pursue the same (read: merger) at this point of time," said the executive cited above.
The two companies will disclose more details once they get the shareholders agreement, which could happen in a "few days," said sources.
ACC and ACL however clarified that the two majors will continue to work together. "In the meantime, with the intention to maximise synergies between the companies and unlock value for the shareholders, the Board has approved the arrangement with ACL for mutual purchase and sale of materials and services."
For instance, ACL could buy materials from ACC in a market where it doesn't a facility and vice versa. Both the companies are owned by LafargeHolcim. The multinational giant owns 63.56 percent stake in ACL. And holds 50.5 percent stake in ACC through ACL, and another 4.5 percent through an investment arm.
