In a major restructuring involving the Swiss cement maker Holcim Group’s companies in India, Ambuja Cements Ltd. (ACL) has decided to acquire 24 per cent stake in Holcim India that controls 61 per cent stake in ACC for a consideration of Rs.3,500 crore.
The stake is being bought from Holderind Investments, Mauritius.
The board of ACL has approved this decision. Following the acquisition, Holcim India would be merged into Ambuja Cements, and after this intra-group transactions, Ambuja Cements will hold 50.1 per cent stake in ACC, thus bringing greater synergy in the operations of these two Holcim group companies.
The merger swap ratio is one Ambuja share for 7.4 Holcim India shares, translating into an implied swap ratio of 6.6 Ambuja shares for every ACC share. Based on the approved merger swap ratio, Ambuja Cements will issue 58.4 crore new equity shares of Ambuja Cements to Holcim as consideration for the merger. Post-merger, the expanded capital base of Ambuja Cements (post cancellation of the shares held by Holcim India in Ambuja Cements and the issuance of new shares), will increase by 28 per cent and comprise 197.75 crore shares. Holcim will then own 61.39 per cent of Ambuja Cements and the latter will, in turn, own 50.01 per cent of ACC.
The deal is likely to be completed in nine months.
Synergies
“This transaction allows us to capitalise on the prevailing Holcim Group platform, promotes greater co-operation between the group companies, and unlocks significant synergies over time. Investment in the expansion project at Marwar Mundwa is a positive and big next step forward and shows Holcim’s commitment,” said Narottam Sekhsaria, non-executive chairman, Ambuja Cements and ACC, in a statement.
“This transaction is a natural and an important next step towards further strengthening Holcim Gorup’s India platform to increase profitability and facilitate more flexible use of capital. ACC has a strong heritage and its brands have great value in the market — both companies will significantly benefit for a closer collaboration to be ready to embark on the next phase of growth and optimisation,” said Onne Van Der Weijde, Managing Director, Ambuja Cements.
Retaining brands
Speaking on a conference call, Mr. Van Der Weijde said the production and marketing departments of Ambuja Cements and ACC would continue to be operated independently. “It is a very attractive acquisition for Ambuja Cements shareholders. We want to retain both brands and managements separately as there is a large value in both brands”. He said after paying for the transaction, Ambuja Cements would still have Rs.300-400 crore on its balance-sheet. This intra-group move would bring substantial synergy in the logistics and supply chain operations of the company, accruing benefits of up to Rs.900 crore over two years post-completion of the transaction, he said adding that the transaction was done at market value and synergy benefits could rise to Rs.900 crore per annum later.
The Ambuja Cements board has also approved the proposal to invest up to Rs.3,000 crore to acquire 10 per cent more stake in ACC without triggering an open offer. “We have a very positive cash balance. Going forward, we are interested in building up our shareholding in ACC. There is a possibility to acquire more shares of ACC and it could be in various ways; market purchases being one of them.’’
