The Gautam Adani conglomerate is nearing a deal to acquire a controlling stake in Holcim Ltd.’s businesses in India, Bloomberg reported citing people familiar with the matter.
Besides, Adani, other corporate giants such as Aditya Birla Group, and JSW Steel were in the race to acquire Holcim’s stake in Ambuja Cements and ACC—the country’s two largest cement companies, news reports said.
The Adani Group is hammering out the final details of a $10 billion deal for 63.1 percent of Ambuja Cements Ltd,. along with related assets, the people said, asking not to be identified discussing confidential information. A transaction could be announced in the coming days, they said, Bloomberg report said.
Holcim announces India exit last month
The world’s largest cement maker Holcim last month announced its exit from the country after struggling here for a long. The company through two listed entities ACC and Ambuja has 66 million tonnes per annum capacity (MTPA).
The group entered the market 17 years ago and the exit will put its listed arms, Ambuja and ACC, up for sale. Holcim holds a 63.19 percent stake in Ambuja and a 4.48 percent in ACC while Ambuja owns a 50.05 percent stake in ACC.
Holcim’s exit is part of the group’s ‘strategy 2025’ that aims for sustainable solutions for the building materials sector. The significance of cement in the overall group is already declining compared to ready mix concrete, aggregates, roofing, and green building solutions.
The stake sale in Ambuja will trigger an open offer in both ACC and Ambuja.
Since Holcim has a large shareholding in Ambuja and owns only a small fraction directly in ACC the buyer can only buy out Holcim’s 63 percent stake in Ambuja and then trigger an open offer for an additional 26 percent in Ambuja.
In case it is fully subscribed to, a new owner can end up owning 89 percent of the company. This could be a $8.7-billion transaction at the current market price.
Holcim is looking for a quick sale of India assets. Controlling the two companies will give a huge leg-up to the successful bidder, and Holcim’s move has triggered a huge interest from potential suitors.
India, one of the most attractive global cement markets
India is one of the most attractive cement markets globally as is seen by the presence of names such as Heidelberg Cement (formed through its acquisition of Italcementi in 2015) but with a capacity of 12.6 MT.
In 2014, French Holcim and Swiss Lafarge merged their operations globally to form LafargeHolcim and this led to Lafarge India putting its 11 MT on the block (it entered India in the late 1990s) to be picked up by the Nirma Group. Lafarge grew in India through acquisitions and had also bought DLF's cement business in 1999 and then took over Ambuja.
(With PTI inputs)
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