Holcim cements Ambuja deal

Swiss company pays Rs 2,100 crore for 14.8% stake.

Holcim, the world's second largest cement company, today announced it had bought 14.8 per cent stake in Gujarat Ambuja Cements Ltd (GACL) from its promoters, the Sekhsaria and Neotia families, for Rs 2,100 crore.

It has offered to buy another 20 per cent from the retail shareholders of GACL for nearly Rs 2,470 crore to raise its stake to 34.8 per cent. The total outgo will be Rs 4,570 crore in case the open offer is successful.

The announcement came exactly one year after the Swiss cement company entered India by acquiring two-thirds stake in Ambuja Cement India Ltd (ACIL).

By virtue of this acquisition in January 2005, Holcim got a foothold in the Associated Cement Companies (ACC) and Ambuja Cement Eastern. Holcim now holds a one-third stake in ACC and 97 per cent in Ambuja Cement Eastern.

GACL informed the stock exchanges today that its promoters, on January 28, sold 20 crore shares, representing a 14.8 per cent stake, to Holcim for Rs 105 a share.

Holcim's indirectly held wholly owned subsidiary Holderind Investments will launch a 20 per cent open offer to retail shareholders at nearly Rs 90 a share, subject to the approval of the Foreign Investment Promotion Board.

DSP Merrill Lynch advised Holcim in the deal and it is also managing the public offer.

The GACL stock in the morning session of trading hit the day's high of Rs 97.45 but lost steam after indications that the open offer could be priced at Rs 90. It closed at Rs 90.45 on the Bombay Stock Exchange, losing 1.58 per cent over its previous close.

The promoters, who will continue to hold 8.8 per cent in GACL, have received Rs 15 for a share or Rs 300 crore as no-compete fee. Jayesh Doshi, vice president (treasury) of GACL, said the no-compete clause would be valid for three years.

Excluding the no-compete fee, the ACC has an enterprise value of $185 a tonne in the transaction, the costliest acquisition in the Indian cement industry. Last year, Holcim paid an enterprise value of $107 a tonne for a controlling stake in ACIL.

In a related development, Anil Singhvi, whole-time director of GACL, has been appointed managing director of the company for five years.

Narotam S Sekhsaria, who stepped down as managing director "for personal reasons", will be GACL's non-executive vice-chairman. Two non-executive directors, Vinod Kumar Neotia and Harshvardhan Neotia, and whole-time director Pulkit Sekhsaria, resigned from the board.

After the closure of the open offer, Holcim will nominate three directors to the GACL board.

GACL is the country's third largest cement company with a 14-million-tonne capacity. The Ambujas, consisting of GACL, ACC and Ambuja Cement Eastern, is India's second largest cement group with a combined capacity of 34 million tonnes. The Aditya Birla group is the leader with a capacity of 38 million tonnes.

DD Rathi, whole time director and CFO of the Aditya Birla group's flagship firm Grasim Industries, said the acquisition would have no impact on the domestic cement industry as Holcim-GACL had been treated as a combine since last year.

The share prices of GACL have risen by about 40 per cent since November when speculation over the company's promoters pulling out of GACL started doing the rounds. On January 5, a Holcim spokesperson declined to comment on whether the company was eyeing GACL.

A section of the industry felt that a spat between the Neotias and the Sekhsarias forced them to sell their stakes. Harshvardhan Neotia categorically denied this. He, however, declined to explain the rationale behind the move.

"My family decided to sell shares to Holcim. I stood by the decision," he told Business Standard.