Guj Ambuja, Holcim strike $800mn deal

Open offer for ACC at Rs 370/share; stock drops 6%.

Gujarat Ambuja Cements (GACL) and Zurich-based Holcim today announced a strategic partnership, which will see Holcim invest around $800 million in India to acquire majority stakes in ACC and Ambuja Cement Eastern (ACEL).

According to an official release issued by GACL today, Holcim has entered into an agreement with private equity investors (AIG/GIC) of Ambuja Cement India (ACIL) to acquire their entire 40% shareholding in ACIL.

"Simultaneously, Holcim has also entered into share subscription agreement with ACIL for its proposed subscription of approximately $600 million towards capital," the release said.

Post the approvals, Holcim will have 67% equity capital in ACIL, and the balance 33% would be held by GACL.

GACL and Holcim have agreed to make ACIL the platform for the strategic alliance, and Holcim, through ACIL, has announced an open offer to acquire a majority shareholding in ACC.

"ACIL already owns 13.8% shareholding in ACC. Holcim, through ACIL, is now offering ACC shareholders Rs 370 per share by way of an open offer to increase ACIL's shareholding in ACC up to 50.01%.

ACIL also owns 94% of Ambuja Cement Eastern (ACEL). Holcim through ACIL is also making an open offer to acquire its entire public shareholding at Rs 70 per share.

"For the above objectives, Holcim proposes to invest approximately $800 million in India, which will be financed, entirely through internal sources and existing credit facilities. This is by far the largest foreign direct investment in the Indian cement industry," the release said.

Holcim is the second largest cement producer in the world. Its turnover in FY2003 was about $9.4 billion, and current market capitalisation is $12 billion. 

ACC board nod for open offer

The board of directors of Associated Cement Companies (ACC), which met today, has accorded its no-objection to the proposed open offer by Holdcem Cements India (part of the Holcim Group) and Ambuja Cement for acquiring shares of the company. This was announced in a release issued to the BSE today.

Meanwhile, the share prices of both ACC and Gujarat corrected sharply on the BSE today. While ACC crashed 6.5% (Rs 24) to Rs 342, Gujarat Ambuja declined 5% (Rs 22) to Rs 423.