Ambuja Cement shares sprint 10 percent in early trades on Monday after it was announced that the Adani Group has acquired a majority stake in Swiss major Holcim’s India business, the Ambuja Cement-ACC combination, for $10.5 billion in a hotly contested bidding process. that saw participation from major players including Sajjan Jindal-backed JSW Cement and UltraTech Cement from Aditya Birla Group.
Holcim, through its subsidiaries, owns 63.19 percent in Ambuja Cements and 54.53 percent in ACC (of which 50.05 percent is owned by Ambuja Cements). Adani Cement is required to make a mandatory open offer to acquire an additional 20 percent stake in Ambuja Cement.
The value of the Holcim stake and open offer for Ambuja Cements and ACC is $10.5 billion, making this the largest-ever acquisition by Adani and India’s largest-ever infrastructure and materials M&A transaction.
Ambuja Cements and ACC currently have a combined installed production capacity of ~70 MTPA. Both Ambuja and ACC will benefit from synergies with the integrated Adani infrastructure platform, particularly in the areas of raw materials, renewable energy and logistics, where Adani Portfolio companies have extensive experience and deep expertise.
This will allow for higher margins and a higher return on invested capital for the two companies. The companies will also benefit from Adani’s focus on ESG, circular economy and capital management philosophy, said Adani Group.
Gautam Adani, chairman of the Adani Group, said: “Not only is India expected to remain one of the world’s largest demand-driven economies for decades, but it also remains the world’s second largest cement market, yet has less than half of the global average cement consumption per capita.By comparison, China’s cement consumption is more than 7x that of India.When these factors are combined with the various adjacent businesses of our existing operations, including the port and logistics, energy and real estate activities of the Adani Group, we believe we will be able to build a uniquely integrated and differentiated business model and set ourselves up for significant capacity expansion.”
Ambuja has a milling capacity of 31 tons per year and plans to increase it to 40 tons per year in the next two years. About 42 percent of the milling capacity is located in the north, followed by 28 percent, 26 percent and 5 percent in the western, eastern and central regions respectively.
Likewise, ACC has a milling capacity of 35 tons per year, which will be expanded to 40 tons per year in the first half of 2023. Upon completion of the ongoing expansion, ACC will have 23-27 percent milling capacities in the East, South and Mid regions, and 15 percent and 10 percent capacity in the North and West regions, respectively.
“As the deal closes, as ACC and Ambuja Cements become a direct, and most importantly identifiable, promoter-controlled entity and Adani emerges as the second largest player in the Indian cement industry, this deal will potentially increase the fortunes of the industry change. for an improvement!” said analysts at Phillips Capital.
Foreign research firm Philip Capital said: “We have upgraded Ambuja Cement to buy and raised the target price to Rs 440 per share and also maintain the buy on ACC and raised the target price to Rs 2,850 per share. The research firm has kept the estimates for Ambuja unchanged. held & ACC.” It improved target multiples for ACC from 13x to 15x and Ambuja Cement to 18x from 16x, CNBC-TV18 reported.
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