This story first appeared in DNA Money edition on Thursday, July 25, 2013.
In an inter-group restructuring move, Switzerland-based Holcim Ltd is increasing its holding in Ambuja Cements to 61.39% from 50.55%.
In turn, Ambuja Cements will acquire its holding company Holcim India Pvt Ltd’s 50.01 stake in ACC Ltd.
In a two-step transaction, Ambuja Cements will acquire 24% stake in Holcim India from Holderind Investments Ltd, Mauritius (Holcim) for a cash consideration of Rs 3,500 crore. This will be followed by a merger of Holcim India into Ambuja and as consideration for the merger, Ambuja will issue 58.4 crore new equity shares to Holcim at the prevailing market price.
The merger of Holcim India would be in the ratio of one Ambuja Cement share for 7.4 Holcim India shares, translating into an implied swap ratio of 6.6 Ambuja shares for every ACC share.
Ambuja shares closed nearly 3% lower at Rs 191.1 on BSE, while ACC lost 1.16% to Rs 1,231 apiece on Wednesday.
Onne Van Der Weijde, managing director, Ambuja, said the transaction will increase profitability and facilitate more flexible use of capital. “Both companies will significantly benefit from a closer collaboration to be ready to embark on the next phase of growth and optimisation. Together we’ll drive increased realisation of synergy potential and save on costs,” Weijde said in a conference call late on Wednesday.
The synergy potential between Ambuja and ACC is likely to bring in cost savings to the tune of Rs 900 crore through supply chain and fixed cost optimisation.
This will be realised in a phased manner over two years post completion of the transaction.
The total deal value (cash and issue of share) is expected to be Rs 14,660 crore. Funding the cash component will be done through cash on books as payments to Holcim are to be made over a period of nine months.
Post the transaction, Holcim will own all its investments in ACC through Ambuja Cements.
“The transaction is expected to be neutral on Holcim’s EPS in the first full year following the completion of the transaction and accretive thereafter,” said Holcim CEO Bernard Fontana.
Weijde asserted that two companies will continue to function the way they have been in the past. The two brands will be retained and so will be the management team, separate retailer and dealer network.
Ambuja will be looking to increase its stake in ACC within the next three years.
Weijde confirmed that the company has clear intentions of doing so and a proposal to this effect has been approved by the board already.
“We will make commercially reasonable efforts to invest up to Rs 3,000 crore to acquire an economic ownership in ACC of up to 10% without triggering a mandatory open offer,” he said. However, Weijde denied any possibilities of delisting ACC anytime in the near or distant future.
According to Narotam Sekhsaria, non-executive chairman, Ambuja and ACC, “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.”
The consolidation will result into a more balanced pan-India footprint with 58 million tpa capacity. Both companies will continue with their expansion plans of over 10 million tpa capacity with additional projects in the pipeline (e.g. ACC Ametha / Tikaria). As part of its long-term commitment in the Indian market, investment will be made by Holcim in Marwar Mundwa project with an overall capacity of 4.5 million tpa in North-Central India.
Ambuja will hold an extra-ordinary general meeting in the December quarter to approve the transaction and will complete the process of merger by mid next year.
In an inter-group restructuring move, Switzerland-based Holcim Ltd is increasing its holding in Ambuja Cements to 61.39% from 50.55%.
In turn, Ambuja Cements will acquire its holding company Holcim India Pvt Ltd’s 50.01 stake in ACC Ltd.
In a two-step transaction, Ambuja Cements will acquire 24% stake in Holcim India from Holderind Investments Ltd, Mauritius (Holcim) for a cash consideration of Rs 3,500 crore. This will be followed by a merger of Holcim India into Ambuja and as consideration for the merger, Ambuja will issue 58.4 crore new equity shares to Holcim at the prevailing market price.
The merger of Holcim India would be in the ratio of one Ambuja Cement share for 7.4 Holcim India shares, translating into an implied swap ratio of 6.6 Ambuja shares for every ACC share.
Ambuja shares closed nearly 3% lower at Rs 191.1 on BSE, while ACC lost 1.16% to Rs 1,231 apiece on Wednesday.
Onne Van Der Weijde, managing director, Ambuja, said the transaction will increase profitability and facilitate more flexible use of capital. “Both companies will significantly benefit from a closer collaboration to be ready to embark on the next phase of growth and optimisation. Together we’ll drive increased realisation of synergy potential and save on costs,” Weijde said in a conference call late on Wednesday.
The synergy potential between Ambuja and ACC is likely to bring in cost savings to the tune of Rs 900 crore through supply chain and fixed cost optimisation.
This will be realised in a phased manner over two years post completion of the transaction.
The total deal value (cash and issue of share) is expected to be Rs 14,660 crore. Funding the cash component will be done through cash on books as payments to Holcim are to be made over a period of nine months.
Post the transaction, Holcim will own all its investments in ACC through Ambuja Cements.
“The transaction is expected to be neutral on Holcim’s EPS in the first full year following the completion of the transaction and accretive thereafter,” said Holcim CEO Bernard Fontana.
Weijde asserted that two companies will continue to function the way they have been in the past. The two brands will be retained and so will be the management team, separate retailer and dealer network.
Ambuja will be looking to increase its stake in ACC within the next three years.
Weijde confirmed that the company has clear intentions of doing so and a proposal to this effect has been approved by the board already.
“We will make commercially reasonable efforts to invest up to Rs 3,000 crore to acquire an economic ownership in ACC of up to 10% without triggering a mandatory open offer,” he said. However, Weijde denied any possibilities of delisting ACC anytime in the near or distant future.
According to Narotam Sekhsaria, non-executive chairman, Ambuja and ACC, “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.”
The consolidation will result into a more balanced pan-India footprint with 58 million tpa capacity. Both companies will continue with their expansion plans of over 10 million tpa capacity with additional projects in the pipeline (e.g. ACC Ametha / Tikaria). As part of its long-term commitment in the Indian market, investment will be made by Holcim in Marwar Mundwa project with an overall capacity of 4.5 million tpa in North-Central India.
Ambuja will hold an extra-ordinary general meeting in the December quarter to approve the transaction and will complete the process of merger by mid next year.
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