Over the past few weeks, domestic corporate giants such as Adani Group, Aditya Birla Group, and JSW Steel are racing to acquire Holcim’s stake in Ambuja Cements and ACC—the country’s two largest cement companies. The development comes days after reports emerged that Holcim Group, the world’s largest cement manufacturing firm, is planning to sell its entire stake in Ambuja Cement and ACC. The board of Holcim Group is set to meet this week in this regard.
The Switzerland-based company currently holds 63.1 per cent stake in Ambuja Cements, and a 4.48 per cent stake in ACC. Notably, Ambuja holds a 50.05 per cent stake in ACC. If the deal goes through, Holcim is expected to get as much as Rs 79,200 crore or $10.35 billion. According to the reports, the acquirer of both these companies will have to come up with an open offer to buy a 26 per cent stake in these companies from non-shareholders.
Companies That Are Bidding To Acquire Ambuja Cement, ACC
According to a report by Business Standard, last week Adani Group and JSW submitted the non-binding bids to acquire Ambuja Cement with funding from private equity firms.
Both the firms have also set a timeline to close the deal at the earliest. While JSW has roped in Apollo Global Management as its lead partner for the funding, Adani Group will use its own capital along with a few sovereign funds based out of the Gulf to fund the deal.
Apart from Adani Group, and JSW, the country’s largest cement maker Aditya Birla Group’s flagship company Ultratech Cement is also eyeing to acquire both the rival companies. However, approval from the competition commission of India is expected to take time.
Notably, Indian retail king and veteran investor Radhakishan Damani, who holds 23 per cent in the South-based India Cements, is also planning to join this hot contest this week by partnering with other bidders by investing Rs 10,000 crore in the deal. Radhakishan Damani holds the country’s second-largest retail chain D-Mart. According to a Livemint report, cement major and the country's oldest cement manufacturing firm, Dalmia Bharat Limited is also likely to join the race to acquire Ambuja Cements and ACC.
Ambuja’s current market valuation stands at Rs 75,107 crore, while ACC is valued at Rs 44,000 crore, data from BSE showed.
Experts say the deal is the most lucrative in the cement industry and will make the acquirer one of the most profitable cement companies with almost 17 per cent of the cement Industry’s revenue shares in its pocket. This in turn is only second to Aditya Birla-led Ultratech Cement which holds almost 30 per cent revenue share in the cement industry. The deal, if goes through, is touted to be the biggest corporate deal in the country, after Flipkart’s acquisition by Walmart worth $16 billion in 2018. Moreover, Ambuja's revenue from operations spiked 2.4 per cent to Rs 7,900.04 crore during the January to March quarter for FY2021-22, compared to Rs 7,714.81 crore in the corresponding quarter of the previous financial year.
According to the Business Standard report, the bids will be judged on the basis of the cash offer and the time taken to close the deal. Notably, Holcim Group is planning to close the deal at the soonest.
What Does The Deal Mean For India
The deal is said to be the single-largest foreign capital outflow of the country. So far, the acquisition of Cairn Energy’s India business by Anil Agrawal led Vedanta in 2010 worth $4.48 billion is said to be the largest foreign capital outflow of the country.
Why Is Holcim Selling Its Stake In India
Though there are no official comments made by the Swiss company, experts are of the view that it is part of its transformational strategy to diversify, which the company announced in 2021. The company is planning to diversify its portfolio across more mature markets. Apart from India, Holcim Group has sold assets in Malawi, Zambia, Madagascar, and Brazil.