Risk firms lukewarm to Holcim open offer

Insurance companies, which hold 13.4 per cent in Ambuja Cements (ACL), are reluctant to tender their shares in the open offer announced by Holcim, raising doubts about the success of the issue.

Holcim, the world's second-largest cement maker, recently announced that it would buy 3.9 per cent in ACL from the previous majority owners, the Sekhsaria-Neotia combine, and made a 20 per cent open offer to increase its stake in ACL to 56 per cent.

This is Holcim's second open offer to the ACL shareholders after the first one proved unsuccessful last year.

Life Insurance Corporation (LIC), the company's second largest shareholder with a 10.9 per cent stake, is not impressed with the offer price and is therefore not tempted to participate.

A senior LIC executive told Business Standard, "Holcim did not approach us and we have not thought about participating in the offer." Asked why it would stay away from the offer, the executive said ACL's price might rise after Holcim consolidates its shareholding.

A senior executive of General Insurance Companies (GIC), which holds 1.1 per cent, said, "We are examining the proposal."

The ACL stock today closed at Rs 136.10, up by 1.45 per cent, on the Bombay Stock Exchange. Priced at Rs 154 a share, the offer, including the purchase of 3.9 per cent from the Sekhsaria-Neotia duo, will cost Holcim Rs 5,463 crore.

The offer will open on October 18 and close on November 6. The specified date is fixed on September 21. After last year's unsuccessful open offer, Holcim had raised its shareholding in ACL by merging Ambuja Eastern, an Ambuja group company, with itself and through creeping acquisition. Holcim now holds 32.3 per cent stake in ACL.

Industry experts said with insurance companies lukewarm to the open offer, the acceptance level for the minority shareholders will go up by 5 per cent to 35 per cent. This would mean that 35 shares will be accepted out of every 100 shares offered. ACL is the country's third-largest cement company with a capacity of 16 million tonnes.

After the buy-out, the Sekhsaria-Neotia combine will hold less than one per cent but will continue to hold their present positions as vice-chairman and chairman respectively.