Swiss giant lafargeHolcim on Monday announced Rs5,000-crore sale of its two cement plants in Jharkhand and Chhattisgarh to Birla Corporation, the flagship firm of the MP Birla Group.
The world’s biggest building materials supplier had to sell the two units after Competition Commission of India (CCI) in April this year approved the merger of Holcim and lafarge on condition that the latter will divest one cement plant and one grinding station in Eastern India.
The deal will be crucial for Birla Corporation to expand its presence in Eastern India’s Jharkhand, and Chhattisgarh. It has cement plants in Madhya Pradesh, Uttar Pradesh, Rajasthan and West Bengal.
lafargeHolcim in a statement on Monday said, “It has entered into a letter agreement with Birla Corp subject to approval by the CCI for the divestment of certain of its assets in India as part of the merger of its legacy companies for an enterprise value of Rs5,000 crore (approx. CHF 750 million).The proceeds from the sale of the divestment business will be used to further reduce debt.”
After the divestment, lafargeHolcim will have a cement capacity of around 68 million tonnes (MT) in India. “As announced in April 2015, lafargeHolcim has received conditional clearance from the CCI for the merger. In that context, a package of assets for divestments had been agreed with the CCI which includes the Sonadih cement plant and Jojobera grinding station in Eastern India currently operated by lafarge India,” the group said.
Reacting to the development, Birla Corp shares breached the upper circuit at Rs543.50 apiece at the BSE and closed at Rs540.25, over 19 per cent up from its previous closing.
The two plants have an annual cement capacity of 5.15 MT and the transaction details will be submitted to the CCI for approval and is subject to other regulatory approvals and customary conditions, lafargeHolcim said.
Jojobera plant has a cement grinding capacity of about 4.6 MTPA (million tonnes per annum) while the unit at Sonadih in Chhattisgarh has a cement grinding capacity of around 0.55 MTPA besides a clinker capacity of 3.10 MTPA.
Diversified group Birla Corporation said “It has agreed to a transaction with lafarge India Pvt ltd, whereby Birla Corp, either directly or through its wholly-owned subsidiary, shall acquire both the Jojobera and Sonadih cement businesses (Acquisition business) from lafarge India for an Enterprise Value of Rs5,000 crore”.
The firm will acquire cement business, which includes an integrated cement unit at Sonadih (Chhattisgarh), a cement grinding unit at Jojobera (Jharkhand), along with the brands -- Concreto and PSC brands, it added.
Birla said that upon the completion of this transaction, the company will consolidate its position in the eastern India cement market, where the demand supply scenario and outlook continue to remain buoyant.
Commenting on the transaction, Birla Corp Chairman Harsh lodha said, “The acquisition business together with Concreto and PSC brands perfectly fits into our strategic vision and ambition of enhancing our competitiveness in our chosen markets.”
The company said the transaction will be funded through exiting cash reserves and incremental debt, and is subject to approval of Competition Commission of India and other regulatory approvals.
Birla Corporation has products ranging from cement to jute goods, PVC floor covering, as well as auto trims.
Holcim, which is a producer of cement and construction materials, has presence in India through its two indirect subsidiaries viz ACC and Ambuja Cements. Besides, it is present in the RMC and aggregates segments.
lafarge, which is also into similar business, is present in the product segments of cement, RMC and aggregates in India through its indirect subsidiaries -- lafarge India Pvt ltd and lafarge Aggregates & Concrete India Pvt ltd. Cement division of Birla Corporation has seven plants spread across Madhya Pradesh, Rajasthan and Uttar Pradesh with a total capacity of around 9.3 MT.