Our Corporate Bureau
31 January 2006
Less than a year after it took control of ACC, Swiss cement major Holcim has consolidated its position in the country by acquiring a major stake in Gujarat Ambuja Cements. Besides the impact on the Indian cement industry, the $1 billion investment in a major infrastructure sector company by a global industry leader is an emphatic confirmation of the country's growth potential.
In a major consolidation move in the Indian cement industry, Holcim has acquired a 14.8 per cent stake in Gujarat Ambuja Cements (GACL) from its existing promoters. GACL is the fourth-largest cement manufacturer in the country behind ACC, UltraTech Cements and Grasim.
Holcim will pay Rs 105 per share of GACL, including a non-compete premium of Rs 15 per share. Holcim will also make a voluntary open offer for an additional 20 per cent of GACL later in February at Rs 90 per share.(See: Holcim acquires 14.8% in Gujarat Ambuja; to make open offer)
The acquisition of 20 crore GACL shares from the existing promoters has cost Holcim Rs 2,100 crore. An additional 20 per cent through the open offer would cost around Rs 2,400 crore, taking Holcim's total investment in GACL to Rs 4,500 crore, or slightly over $1 billion.
The acquisition values GACL at around Rs 12,070 crore, excluding the non-compete premium paid to existing promoters. Holcim is paying around $200 per tonne of manufacturing capacity, double of what it paid for ACC.
The high valuation of GACL is mostly on account of the much higher operating margins enjoyed by the company when compared to its industry peers. GACL is also the dominant player in the western parts of the country and strategically located to exploit the export potential to the Middle East. The fact that Holcim would emerge as one of the dominant players after the deal also explains the premium valuation.
