Holcim, Lafarge say global merger won't adversely impact competition in India

In a filing to CCI, the cement majors said effective competition will continue to sustain

The world's cement giants - Holcim and Lafarge - have said that their plans of global merger will not have adverse impact on Indian cement market.

In a joint filing to Indian competition watchdog the Competition Commission of India (CCI), the cement majors said that after the proposed transaction, expected to be closed by mid of 2015, the effective competition in the cement as well as the ready mix concrete segment will continue to sustain.

In India, Holcim has its presence through its two subsidiaries - ACC and Ambuja Cements. Lafarge's subsidiaries include Lafarge India and Lafarge Aggregates & Concrete.

Currently, India has a total cement manufacturing capacity of nearly 350 million tonne per annum (mtpa). Holcim and Lafarge, put together, have a combined capacity of 65 mtpa - the largest in India followed by UltraTech at 59 mtpa.

"The combined entity will continue to face aggressive competition from existing players such as UltraTech, Shree Cement and Jaypee on a pan-India level. Additionally the combined entity will face competition from companies which are more active on a regional basis, such as Reliance, Dalmia, Century Cement," they said in their filing.

Post their merger, the market comprising eastern part, Madhya Pradesh and East Uttar Pradesh will have the largest market share at 29 per cent. It is because of the fact that Lafarge's existing capacities are concentrated most in the eastern region.

Further, the two entities have clarified that the merger would not result in escalating of cement prices in a sustained manner.

According to Holcim and Lafarge (post merger it will be called LafargeHolcim), "The Indian cement industry is highly competitive with large number of players competing for the share of supplies. The market is characterised by excess capacity, which hinders and will continue to hinder the ability of the combined entity to sustainably increase prices."

The proposed transaction of merger of Lafarge and Holcim is in the nature of a merger of equals and strategic combination of the businesses of the two companies that aims to create a geographically diversified company active in the production and supply of cement, aggregates and ready mix concrete.

This will enable them optimise capital allocation across various countries where both cement makers have a footprint. The deal is likely to generate synergies of approximately Euros 1.4 billion on full run rate basis over three years.