Billionaire Gautam Adani-led Adani Group on Sunday said that it won the deal to acquire controlling stake in Holcim’s businesses in India for $10.5 billion, marking the ports-to-energy conglomerate's entry into the cement sector.
The Adani Group will acquire 63.1 per cent of Ambuja Cements along with related assets. Ambuja's local subsidiaries include ACC Ltd, which is also publicly traded.
Holcim, through its subsidiaries, holds 63.19 per cent in Ambuja Cements and 54.53 per cent in ACC (of which 50.05 per cent is held through Ambuja Cements).
"The value for the Holcim stake and open offer consideration for Ambuja Cements and ACC is $10.5 billion, which makes this the largest-ever acquisition by Adani, and India's largest-ever M&A transaction in the infrastructure and materials space," the statement said.
Holcim in a statement said, "The corresponding offer share prices of Rs 385 for Ambuja Cement and Rs 2,300 for ACC translate into cash proceeds of CHF 6.4 billion (Swiss Franc) for Holcim."
Adani has in the last couple of years diversified beyond its core business of operating ports, power plants and coal mines into airports, data centres and clean energy.
As per the analysts the deal is positive for ACC and Ambuja Cements from a long term perspective as it will help them in bringing down costs, trim debt which will lead to better margin and higher returns.
"The transaction would help the companies slash costs, trim debt and better cope with the soaring energy prices and weaker demand that have hurt the sector so far. Also, post the potential merger, there could be a consideration for brand consolidation leading to better margins and higher return on capital employed for the two companies. ACC and Ambuja both stocks are good for long term investment with a target of Rs 2,450 and Rs 420 respectively," Ravi Singh, vice president and head of research at Share India told Outlook Business.
The deal also highlights the growing dominance of Indian companies to complete large transactions with foreign players and help Adani Group increase it global footprint.
"It is good that Indian companies can do such large transactions with global players. Going ahead India should do well in the long term in cement sector and this deal would help Adani Group to increase its global footprint and would also help in backward integration as the company is building airports and other infra projects," Vijay Chopra of Enoch Ventures said.
Adani Group said that it will double the capacity of ACC and Ambuja Cements to 140 million tonnes per annum in the next five years and this might affect the pricing of cement sector in India.
Adani’s entry might affect the pricing in the cement sector due to its power as a supplier Adani group will benefit from the economies of scale for its infrastructure business. Investors are advised to hold their existing position in Ambuja and ACC cement as they are expected to benefit from this scale, said Manoj Dalmia, founder and director at Proficient Equities.
Given the government's push to build infrastructure in the country cement demand is likely to stay strong and this will help ACC and Ambuja Cements in long run, analysts added.
