The deal fulfills conditions set by Competition Commission for Holcim merger; to help Birla Corp expand presence in Eastern India, J’khand, C’garh
New Delhi : Swiss giant LafargeHolcim announced Rs 5,000-crore sale of its two cement plants in Jharkhand and Chhattisgarh to Birla Corporation, the flagship firm of the MP Birla Group. The world’s biggest building materials supplier had to sell the two units after Competition Commission of India (CCI) in April this year approved the merger of Holcim and Lafarge on condition that the latter will divest one cement plant and one grinding station in Eastern India. The deal will help Birla Corporation expand presence in Eastern India, Jharkhand, Chhattisgarh. It has cement plants in Madhya Pradesh, Uttar Pradesh, Rajasthan and West Bengal. LafargeHolcim in a statement said, “It has entered into a letter agreement with Birla Corp subject to approval by the CCI for the divestment of certain of its assets in India as part of the merger of its legacy companies for an enterprise value of Rs 5,000 crore (approx. CHF 750 million).
The proceeds from the sale of the divestment business will be used to further reduce debt.”
After the divestment, LafargeHolcim will have a cement capacity of around 68 million tonnes (MT) in India. “As announced in April 2015, LafargeHolcim has received conditional clearance from the CCI for the merger. In that context, a package of assets for divestments had been agreed with the CCI which includes the Sonadih cement plant and Jojobera grinding station in Eastern India currently operated by Lafarge India,” the group said.
Birla Corp shares breached the upper circuit at Rs 543.50 apiece at the BSE and closed at Rs 540.25, over 19% up from its previous closing. The two plants have an annual cement capacity of 5.15 MT and the transaction details will be submitted to the CCI for approval and is subject to other regulatory approvals and customary conditions, LafargeHolcim said. Jojobera plant has a cement grinding capacity of about 4.6 MTPA (million tonnes per annum) while the unit at Sonadih in Chhattisgarh has a cement grinding capacity of around 0.55 MTPA besides a clinker capacity of 3.10 MTPA.
Birla Corp Chairman Harsh Lodha said, “The acquisition business together with Concreto and PSC brands perfectly fits into our strategic vision and ambition of enhancing our competitiveness in our chosen markets.” The company said the transaction will be funded through exiting cash reserves and incremental debt, and is subject to approval of Competition Commission of India and other regulatory approvals.
The cement industry has seen a number of M&As over the past decade as foreign players like Lafarge, Holcim, Heidelberg and others began to enter the Indian market opting for the brownfield route. Some of the major deals over the last decade:
2005: Holci acquires stake in ACC at an enterprise value of $111 per tonne. Later acquires stake in Ambuja Cement in 2006 at an enterprise value of $193 per tonne.
2006: Heidelberg Cement Group enters India via a 50:50 joint venture in Indorama Cement and acquires majority stake in Mysore Cement.
2008: Heidelberg Cement Group acquires balance stake in Indorama Cement and merges operations of the same with Mysore Cement forming Heidelberg Cement India. Capacity of the company increases to 3.07 mtpa.
September 2013: UltraTech bought the 4.8-million tonne Gujarat unit of Jaiprakash Associates for an enterprise value of Rs.3,800 crore in its biggest acquisition in two years.
March 2014: Ambuja Cement first acquires 24% stake in Holcim India for Rs.3,500 crore, followed by a merger of Holcim India into Ambuja Cements.
December 2014: Ultratech acquires two plants from Jaiprakash Associates in Bela in Madhya Pradesh for an enterprise value of Rs.5,400 crore.
