 "Holcim-Lafarge merger faces CCI hurdle in India")
Despite announcing a $7.3-billion divestment plan to Irish CRH, the global merger of Swiss cement maker Holcim and its French counterpart Lafarge, which will lead to the creation of the world’s largest cement maker, is far from over, as far as India is concerned. The Competition Commission of India (CCI) is scrutinising whether the deal might lead to monopoly for the merged entity, especially in eastern India.
In April 2014, both companies had announced a global merger, which could lead to a combined capacity of 427 million tonnes (mt), ahead of the China’s Anhui Conch (currently 227 mt). This had raised the eyebrows of anti-trust watchdogs in several countries. On Monday, both companies announced to overcome regulatory hurdles, they would sell assets in Europe, Canada, Brazil and the Philippines, which had generated euro 5.2 billion in revenue and euro 744 million in earnings last year, to CRH.
“Should there be any need to make additional divestments in any jurisdiction where regulatory approval is still pending, those divestments will be dealt with in a separate process,” said a Holcim spokesperson. This means there could be separate bidding for such assets in India, if these are up for sale. Kumar Mangalam Birla-promoted UltraTech has already informed investment bankers of its interest in such assets.
The global giants expect to complete their merger by June this year. Holcim said its “dialogue with the regulatory body (CCI) is ongoing”.
“The Holcim-Lafarge deal has competition concerns, as evidenced by the CCI seeking objections from affected persons under section 29(2) of the Competition Act,” says Amitabh Kumar, partner at corporate law firm J Sagar Associates.
However, a conditional nod, as in the case of the Sun-Ranbaxy deal, is a possibility. “The conditions imposed will depend on the market definition adopted by the agency, which might ask for divestiture if the markets are defined narrowly, based on geographies,” says Kumar from J Sagar Associates.
“The only problem with the India merger will be in eastern India, where Lafarge might have to shed two-three mt of capacities. If it is done, I do not think CCI will be a hurdle for the merger and it can get an approval,” says Piyush Jain, equity research analyst at Morningstar India.
That the cement sector is under scrutiny is clear. In June 2012, CCI had imposed a penalty of Rs 6,307 crore on 11 leading cement makers for forming a cartel to charge higher prices from consumers. Subsequently, the cement companies had moved the Competition Appellate Tribunal, which had asked them to deposit 10 per cent of the penalty while the hearing proceeded. The Supreme Court had declined to interfere with the tribunal’s order.
In April 2014, both companies had announced a global merger, which could lead to a combined capacity of 427 million tonnes (mt), ahead of the China’s Anhui Conch (currently 227 mt). This had raised the eyebrows of anti-trust watchdogs in several countries. On Monday, both companies announced to overcome regulatory hurdles, they would sell assets in Europe, Canada, Brazil and the Philippines, which had generated euro 5.2 billion in revenue and euro 744 million in earnings last year, to CRH.
“Should there be any need to make additional divestments in any jurisdiction where regulatory approval is still pending, those divestments will be dealt with in a separate process,” said a Holcim spokesperson. This means there could be separate bidding for such assets in India, if these are up for sale. Kumar Mangalam Birla-promoted UltraTech has already informed investment bankers of its interest in such assets.
The global giants expect to complete their merger by June this year. Holcim said its “dialogue with the regulatory body (CCI) is ongoing”.
“The Holcim-Lafarge deal has competition concerns, as evidenced by the CCI seeking objections from affected persons under section 29(2) of the Competition Act,” says Amitabh Kumar, partner at corporate law firm J Sagar Associates.
However, a conditional nod, as in the case of the Sun-Ranbaxy deal, is a possibility. “The conditions imposed will depend on the market definition adopted by the agency, which might ask for divestiture if the markets are defined narrowly, based on geographies,” says Kumar from J Sagar Associates.
“The only problem with the India merger will be in eastern India, where Lafarge might have to shed two-three mt of capacities. If it is done, I do not think CCI will be a hurdle for the merger and it can get an approval,” says Piyush Jain, equity research analyst at Morningstar India.
That the cement sector is under scrutiny is clear. In June 2012, CCI had imposed a penalty of Rs 6,307 crore on 11 leading cement makers for forming a cartel to charge higher prices from consumers. Subsequently, the cement companies had moved the Competition Appellate Tribunal, which had asked them to deposit 10 per cent of the penalty while the hearing proceeded. The Supreme Court had declined to interfere with the tribunal’s order.