Century Textiles and Industries Ltd., a B.K. Birla Group company, has decided to demerge its cement business to UltraTech Cement Ltd. of the Aditya Birla Group in a stock (share) swap deal.
Century’s cement business is being acquired at an enterprise value of ₹8,621 crore, including debt of ₹3,000 crore which will be taken over by UltraTech.
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“We were looking for growth opportunities and this deal will give us leadership access throughout the country,” said K.K. Maheshwari, managing director, UltraTech.
“This acquisition is in line with our strategic plan,” he added.
The board of directors of UltraTech Cement, at a meeting on Sunday, approved a scheme of arrangement among both the companies, their respective shareholders and creditors.
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Century’s cement business consists of three integrated cement units in Madhya Pradesh, Chhattisgarh and Maharashtra with a total capacity of 11.4 million tonnes per annuam (mtpa) and a grinding unit in West Bengal of 2 mtpa.
“The transaction provides UltraTech the opportunity for further strengthening its presence in the highly fragmented, competitive and fast growing east and central markets and extending its footprint in the western and southern markets in the country,” UltraTech said in a statement. “The operations will be bolstered by economies of scale arising out of synergies in procurement and logistics costs; creation of efficiencies by reducing time to market, enhancing competitiveness as well as customer service,” the statement added.
Other advantages include ready-to-use assets with a strong distribution network, availability of land, railway and other infrastructure, UltraTech Cement said. The acquisition may lead to greater shareholder value creation, it added.
Consideration for the demerger will be through issuance of equity shares to the shareholders of Century in the ratio of 1:8 (one equity share of UltraTech of face value ₹10 each for every eight equity shares of Century of face value ₹10 each.
UltraTech would issue 1.4 crore shares to Century, which will increase its equity capital to ₹288.58 crore.
The transaction is subject to the approval of shareholders and creditors, stock exchanges, NCLT, CCI and all other regulatory approvals as may be required.
The transaction is expected to complete within 6-9 months.
Upon consummation, UltraTech’s cement capacity will increase to 109.9 mtpa, including its overseas operations. This will position UltraTech as the third largest cement player globally (excluding China).