The Aditya Birla Group, which owns the country’s largest cement company Ultratech, has officially joined the race to buy a stake in Ambuja Cement and Swiss cement giant Holcim in ACC, said a person familiar with the development.
The JSW Group, which already has a presence in the sector, and the Adani Group, which does not have a presence, are also reported to be competing for valuable assets.
Top steel player ArcelorMittal has also shown interest and the two companies could join the acquisition race.
The Birlas have officially bid for Holsim’s assets. The acquisition will be done through Ultratech, a source close to the development told PTI.
The source stressed that this is not a mandatory bid.
The source added that his proposal includes a 10-15 metric tonne expansion of Holsim’s capacity so that the deal does not get stuck with the fair trade body CCI.
“We are quite confident of getting CCI approval because we are ready to dispose of some target company’s assets,” the source said.
When contacted, a spokesperson for Aditya Birla Group Firm declined to comment as they did not respond to market speculation.
There are a few examples of CCI clearing mergers and acquisitions when the acquisition partnership went beyond a limit, the source said, noting that when Vodafone and Idea merged, both operators had to come out of a few circles.
Holcim, the world’s largest cement maker, announced last month that it was leaving the country after a long struggle. The company has an annual capacity (MTPA) of 6 million tonnes through the two listed companies ACC and Ambuzar.
The group entered the market 17 years ago and the departure will result in the sale of its listed weapons, Ambuja and ACC. Holsim has 63.19 per cent stake in Ambuzar and 4.48 per cent in ACC and 50.05 per cent in Ambuzar ACC.
Holcim’s departure is part of the group’s ‘Strategy 2025’ aimed at sustainable solutions for the building materials sector. The importance of cement in the overall group is already declining compared to ready-mixed concrete, aggregate, roofing and green building solutions.
The sale of Ambuja’s shares will result in an open offer for both the ACC and Ambuja.
Since Holcim has a large stake in Ambuja and owns only a small fraction directly in ACC, the buyer can only buy 63% of Holcim’s shares in Ambuja and then launch an open offer for an additional 26% in Ambuja.
If it is fully subscribed, a new owner can own 89 percent of the company. At current market prices this could be a USD 8.7 billion transaction.
Ultratech is by far the largest cement manufacturer in the country with an installed capacity of 117 metric tons, which accounts for about 25 percent of the 500 metric tons of domestic cement market, and if the deal goes through, it will have to invest 10-15 metric tons. Holcim’s ability to meet CII rules.
Ultratech is rich in cash and can easily raise debt for buying. As of the December quarter, its debt per equity stood at a low of 0.32x.
Ultratech is the world’s third-largest cement producer outside of China, and the deal with Holcim will make it more cementable, but it is unlikely to be the world’s second-largest, the source said.
In the past, it has acquired assets from competitors such as JP Group’s cement assets, Binani Cement and Century Textile’s cement business.
Sources said that Holcim Steel-to-Energy Group is in talks with JSW Group and on Tuesday the Financial Times quoted its chairman Sajjan Jindal as saying that it would bid USD 7 billion for Holcim’s Indian affiliates.
JSW will offer USD 4.5 billion in its own equity and USD 2.5 billion from undisclosed private equity partners for Holcim’s Indian assets Ambuja Cement and ACC, the report said.
According to industry insiders, the Adani Group, which is entering the cement segment, has also entered the field to acquire Holcim’s wealth in India.
The team, led by the richest Indian Gautam Adani, is planning to enter the cement business. It is already setting up two cement units at Dahej in Gujarat and Raigad in Maharashtra and wants to be a leader in the segment, sources said.
Holcim is looking to sell India’s assets fast. The control of the two companies will give a successful bidder a huge leg-up, and Holcim’s move has sparked a huge interest from potential suitors.
Birla Group will get a huge control of the industry if its bid is exceeded. Therefore, it seems to have chosen the pitch for a deal in the hope that it would cut with the Competition Commission.
As seen by the presence of names like Heidelberg Cement (formed through the acquisition of Italcementi in 2015), but with a capacity of 12.6 metric tons, India is one of the most attractive cement markets in the world.
In 2014, French Holcim and Swiss Lafarge consolidated their operations worldwide to form Lafarge Holcim and as a result Lafarge India placed in its 11 metric ton block (it entered India in the late 1990s) was selected by the Nirma Group. Lafarge grew through acquisitions in India and also bought DLF’s cement business in 1999 and then took over Ambuja.