Billionaire Gautam Adani won the race on Sunday to acquire Swiss cement major Holcim’s share of Ambuja Cements and its subsidiary ACC for $10.5 billion (about Rs 81,361 crore), including the open bids. Gautam Adani said the group expects aggressive expansion and plans to double its existing capacity of 70 million tons per year within the next five years. He added that the existing teams can bring in the expertise to realize the group’s growth plans in the future. The Adani family announced via a special purpose offshore vehicle that it had entered into definitive agreements to acquire Holcim Ltd’s entire stake in two of India’s leading cement companies – Ambuja Cements and ACC – the Adani group said in a statement. .
The value to the Holcim stake and the overweight of the open offer make this the largest-ever acquisition by Adani, and the largest-ever M&A transaction in India’s infrastructure and equipment space. “Our step into the cement industry is yet another confirmation of our belief in our country’s growth story,” said Gautam Adani, group president.
“Not only is India expected to remain one of the world’s largest demand-driven economies for decades to come, India also remains the world’s second largest cement market and yet has less than half the global average cement consumption per capita. In comparison, China’s cement consumption is more than 7 times that of India. When these factors are combined with the various adjacent businesses of our existing business, including the port and logistics business, the energy business and the real estate business of the Adani Group, we believe we will be able to create a uniquely integrated and build a differentiated business model and put ourselves on the map. for a significant capacity expansion.” added Adani.
India’s second largest cement player
The deal will make Adani Group the second largest cement player in the country. The conglomerate has agreed to acquire a 63.19 percent stake in Ambuja Cements and approximately 54.53 percent in ACC. The $10.5 billion value for the stake also includes an open offer. With a combined capacity of 70 million tons per year, the deal puts Adani just behind India’s largest cement producer – UltraTech Cement Ltd. of the Aditya Birla Group – with a capacity of 120 MTPA.
Deal Valuation
According to the statement, Adani has agreed to purchase shares in Ambuja Cements for Rs 385 per share and shares in ACC for Rs 2300 each. Thus, the $10.5 billion deal carries a 4 percent premium (for both ACC and Ambuja) as of its last close on April 13. If you look at the share price as of Friday’s close, Adani is buying Ambuja at over 7 percent premium and ACC at about 8 percent premium.
Other bidders for the deal
In addition to Adani Enterprises, companies such as industrialist Sajjan Jindal-led JSW Group, Dalmia Bharat, Aditya Birla Group’s UltraTech Cement Ltd and ArcelorMittal are said to be competing for Holcim Group’s Indian assets.
Why did Holcim leave India?
The world’s largest cement maker Holcim announced his departure from the country last month. The company has a capacity of 66 million tons per year (MTPA) through two listed entities ACC and Ambuja.
The group entered the market 17 years ago and with the exit, its listed branches, Ambuja and ACC, will be put up for sale. Holcim’s exit is part of the group’s ‘strategy 2025’, which strives for sustainable solutions for the building materials sector. The importance of cement in the total group is already declining compared to ready-mixed concrete, aggregates, roofing and green building solutions. “We will achieve 30 percent of the group’s net sales in solutions and products…”, the company said last November when announcing its new vision.
No tax liability, compensation in the deal
There will be no compensation or tax liability for Swiss-based Holcim Group in its $6.4 billion transaction to sell its stake in Ambuja Cement and ACC to the Adani Group, the company said in an analyst call on Monday.
Adani must pay fines imposed on Ambuja, ACC for cartel formation
The Adani group is liable for antitrust fines against Ambuja Cements and ACC in India that are being challenged in the highest court. Ambuja Cements and ACC, along with other cement companies, were found guilty of price cartels in a 2016 investigation by the Competition Commission of India.
The CCI had fined 11 cement companies of Rs 6,300 crore. Out of the Rs 6,300 crore fine, Ambuja Cements was liable to pay Rs 1,164 crore and ACC Rs 1,148 crore.
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