C.K. Birla Group firm Orient Cement has signed definitive agreements with Manoj Gaur led Jaypee Group to buy two of its cement units for ₹1,946 crore.
The first agreement was signed by Orient Cements to buy 74% stake in Bhilai unit of Jaypee Cements for enterprise value of ₹1,450 crore.
Bhilai Jaypee Cement Limited (BJCL) is a joint venture between Jaiprakash Associates Ltd. (JAL) and Steel Authority of India Limited (SAIL) and has an integrated PSC cement capacity of 2.2mtpa consisting of a clinkerisation unit in Satna area in Madhya Pradesh and a grinding unit in Bhilai, Chhattisgarh.
Another agreement was signed for the acquisition of the Nigrie Cement Grinding Unit as going concern from Jaiprakash Power Ventures Ltd. (JPVL) for a total consideration of ₹496 crore.
Nigrie unit in Singrauli area, Madhya Pradesh, housed within JPVL, is a cement grinding unit with a capacity of 2 mtpa. This grinding unit is located very close to the end markets in Bihar, Jharkhand and Eastern U.P.
‘Debt-free basis’
“The agreement was signed on a cash-free and debt-free basis and subject to adjustments on account of working capital, if any and subject to approval of SAIL, approval of lenders of BJCL besides other statutory and regulatory approvals, as applicable,” said JP Associates in filing to the exchanges.
Both the transactions were authorised by J.P. Associates board on October 6, 2016. The transaction will be funded by Orient Cement through a mix of internal accruals, debt and equity funding. The acquisition will help Orient Cement take its total capacity to 10.2mtpa from 8.mtpa and provide an entry into the high growth central and eastern regions.
CK Birla Group chairman C.K. Birla said the proposal to acquire BJCL is a significant step towards accomplishing its mission of reaching a capacity of 15 mtpa by 2020.
“The assets proposed to be acquired will also add a new and strong dimension towards diversifying our market reach and helping Orient Cement to further sweat its existing assets,” Mr. Birla had said while announcing the deal.
J P Associates shares went up 2.4% to ₹12 in a flat Mumbai market on Wednesday while Orient Cements shares went down 1.7% to ₹144.6, valuing the company ₹2962 crore.
Moelis & Company is the financial advisor, while Cyril Amarchand Mangaldas is the legal counsel to Orient Cement for this transaction.
