Franco-Swiss cement maker LafargeHolcim Ltd is expecting almostRs.10,000 crore in deal value for the entire 11 million tonnes per annum (mtpa) Indian cement portfolio it plans to sell, according to two people with direct knowledge of the matter.
Among those interested in the assets are JSW Cement Ltd, Irish building materials maker CRH Plc and private equity (PE) firm Blackstone Group LP, according to the two people and a third person familiar with the development.
LafargeHolcim on Thursday said it was considering a revised plan to sell Lafarge’s full cement capacity in India.
Informal talks on the sale of these assets have already started, according to the two people cited in the first instance.
“What is on right now is the informal discussion rounds; formal process will start only once Lafarge receives the Competition Commission of India (CCI)’s approval for the revised plan. The expected valuation for the deal is being quoted at around plus or minus of Rs.10,000 crore,” said one of the two people mentioned above.
Both spoke on condition of anonymity.
The spokespersons for LafargeHolcim, Blackstone and CRH refused to comment for this story.
CCI, the country’s antitrust regulator, had in April directed LafargeHolcim to divest Lafarge’s east India cement assets to allow for the merger between the local units of French cement maker Lafarge SA and Holcim of Switzerland.
Lafarge entered into a deal with Birla Corp. Ltd in August 2015 for its east India assets.
The deal was called off on 2 February because of regulatory hurdles over the transfer of related mine leases.
“Officially, the sale process has not been launched but investors who had previously looked at the assets, including the PE funds, have started looking at the deal and they are trying to assess the value of the assets,” said a second person.
JSW Cement, CRH and Blackstone were also among those that had expressed initial interest in the 5.15 mt east India cement assets that Lafarge had put up for sale in April 2015.
LafargeHolcim is now seeking CCI approval for the revised plan, which involves a full exit from Lafarge’s India cement assets.
“They had written to CCI seeking an approval to sell the entire 11 mtpa which has not come yet and their deadline to complete the asset sale is over; so they are awaiting clarity,” said the third person, a banker who is advising a client on the potential acquisition of these assets.
The banker, who also wanted to remain anonymous, added the transaction is entirely dependent on CCI’s directive.
Lafarge holds the 11 mt cement capacity across Chattisgarh, Jharkhand, Rajasthan, Haryana and West Bengal through its unit, Lafarge India Pvt. Ltd.
“The deal would involve buying out a 100% stake in Lafarge India, and the company does not have a huge debt component to be transferred. It is a fat cheque deal and not many would be able to cut a cheque of that size,” said the first person cited above.
The size of the deal makes it a tough one, said Sandipan Pal, vice-president-real estate and cement, Motilal Oswal Securities Ltd. “Those who have the financial strength to buy (the assets) will face CCI issues in terms of market share; those who can buy (without triggering a CCI issue) will face financing issues because of the size of the deal.”
On 22 January, a spokesperson for JSW group, said in an email to Mint, “We are looking at various opportunities to expand our cement business. Lafarge assets are also under consideration. However, nothing has been concluded.”
A deal, if closed, will help the successful bidder to scale up its presence in India significantly. In the case of JSW, the company would almost triple its capacity from 6 mt to 17 mt.
For CRH, a deal would provide an opportunity to expand its presence with an eye on India’s expected infrastructure demand for the building material in the coming years.
CRH’s current presence in India is restricted to a joint venture with My Home Industries Pvt. Ltd, which has annual capacity of 8.4 mt.
“I think consolidation will continue to happen as building greenfield assets have become increasingly difficult and with mining issues and non-availability of land as a resource we will see continued M&As (mergers and acquisitions) in the sector,” said Srinivas Tekal, director at investment banking firm O3 Capital Global Advisory Pvt. Ltd.
No comments:
Post a Comment