Ultratech makes a formal bid for Holcim#39;s India assets


The JSW Group, which is already present in the sector and the Adani Group which does not have a presence, are also reportedly in the race for the prized assets.


May 12, 2022 / 07:29 AM IST

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The Aditya Birla Group, which owns the country’s largest cement company Ultratech, has formally joined the race to buy out the Swiss cement giant Holcim’s stake in Ambuja Cement and ACC, a person in the know of the development has said.

The JSW Group, which is already present in the sector and the Adani Group which does not have a presence, are also reportedly in the race for the prized assets.

Leading steel player ArcelorMittal has also shown interest and may join the race to acquire the two companies. The Birlas have formally put in a bid for Holcim’s assets. The acquisition will be done through Ultratech, a source in the know of the development told PTI.

The source insisted that this is not a binding bid. The source also said its proposal includes divesting 10-15 mt of Holcim capacity so that the deal does not get stuck with the fair trade body CCI.

“We are pretty confident of getting the CCI approval as we are ready to divest some of the target companies’ assets,” the source said. When contacted, the Aditya Birla group firm’s spokesman refused to comment saying they don’t respond to market speculation.

There are a few examples of the CCI clearing mergers and acquisitions when the acquirer’s stake went beyond a limit, the source said and pointed out that when Vodafone and Idea merged, both operators had to exit a few circles. 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 per cent stake in Ambuja and a 4.48 per cent in ACC while Ambuja owns a 50.05 per cent 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 per cent stake in Ambuja and then trigger an open offer for an additional 26 per cent in Ambuja.

In case it is fully subscribed to, a new owner can end up owning 89 per cent of the company. This could be a USD 8.7-billion transaction at the current market price. Ultratech by far is the largest cement maker in the country with an installed capacity of 117 mt giving it around 25 per cent of the little over 500 MT domestic cement market, and if the deal goes through it will have to divest 10-15 MT of Holcim’s capacity to meet the CII norms.

Ultratech is cash-rich and can easily raise debt for the buyout. As of the December quarter, its debt to equity stood at a low of 0.32x. Ultratech is the world’s third-largest cement maker outside China and the deal with Holcim will further cement this but is unlikely to make it the world’s second-largest, the source said.

In the past, it acquired assets of rivals such as Jaypee group cement assets, Binani Cement and the cement business of Century Textiles. Sources said Holcim is also in discussion with steel-to-energy conglomerate JSW Group and the Financial Times had on Tuesday, quoting its Chairman Sajjan Jindal had reported that it will make a USD 7 billion bid for Holcim’s India subsidiaries.

JSW would 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 had said. According to the industry insiders, Adani Group, which is getting into the cement segment, is also into the fray to acquire Holcim’s India assets.

The group led by the richest Indian, Gautam Adani, has been planning to enter the cement business. It is already setting up two cement units at Dahej in Gujarat and Raigarh in Maharashtra and aspires to be a leading one in the segment, sources said. 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.

The Birla Group will get a huge control of the industry if its bid were to go through. Therefore, it seems to have opted to pitch for a deal hoping it will make the cut with the Competition Commission. 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.

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