LIC note puts value of ACC share at Rs 500

Insurance firm unlikely to take the open offer.

An internal note of the Life Insurance Corporation of India (LIC) has put the valuation of the Associated Cement Companies (ACC) at over Rs 500 per share. This is nearly 35 per cent higher than the offer price of Rs 370 being offered by Swiss cement major Holcim.

This is an indication that LIC, the largest domestic investor in ACC, with a 15.7 per cent stake, is unlikely to respond to the open offer. Going by this report, ACC is valued at around Rs 8,980 crore and the value of LIC's stake is pegged at over Rs 1,400 crore.

Priced at Rs 370 a share, the Holcim offer is expected to open on March 9, subject to necessary approvals. On the Bombay Stock Exchange, the ACC stock today closed at Rs 374.20, up 1.74 per cent over yesterday's close, indicating that punters were still betting on Holcim raising the open offer price for ACC.

Sources close to the development said, ideally LIC could have participated in the open offer, as a chunk of its stake, around 8.5 per cent, was bought from the late Harshad Mehta's holding at around Rs 165. This means at Rs 370, the corporation would have booked a huge profit by responding to the open offer.

However, this is unlikely to happen as, apart from the internal valuation of LIC, there is political pressure, too, against any possible selloff by the state-run insurance body to a multinational company.

"The entire deal may snowball into a major political issue with the Left opposing any move by the corporation to put its stake on the table," a source in Delhi said.

LIC's holding in ACC was higher than Ambuja Cement's holding, which stands at 13.8 per cent. The total holding of insurance companies in ACC stands at over 18.5 per cent. Oriental Insurance holds close to 1.18 per cent while New India holds another 1.73 per cent.

The total holding of banks and financial institutions in the cement company stood at 21.75 per cent while total FII holding in the company stood at 23.27 per cent.

Holcim proposes to increase its holding in ACC to 50.01 per cent from its existing stake of 13.8 per cent through an open offer, being routed through Ambuja Cements. The open offer follows a strategic alliance between Gujarat Ambuja Cement Ltd (GACL) and Holcim, which seeks to acquire majority stake in ACC.

World's second-largest cement producer Holcim wanted to invest $800 million in a complex deal, with a target to wrest the controlling stake in ACC.

The Switzerland-based company will own two-thirds of an investment company, which will eventually have a 50.01 per cent stake in ACC.

The balance one-third holding in the investment company will be with GACL. The Holcim-GACL combine has made the open offer to the shareholders of ACC at Rs 370 per share.

Discordant notes

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• LIC puts value of ACC at Rs 500 per share against Holcim's offer of Rs 370
• Insurance firm unlikely to take the open offer
• Punters still expect Holcim to raise the price
• The issue is taking political overtones, with the Left parties pressing state-owned entities not to sell to an MNC