After acquiring management control of Gujarat Ambuja Cements (GACL) earlier this year, European cement major Holcim has kicked off a consolidation exercise of its various cement holdings in the country. The Holcim-Gujarat Ambuja combine yesterday announced the merger of GACL and Ambuja Cements Eastern Limited (ACEL).

The merger would be effective from 01 January, 2006. Shareholders of ACEL would receive 4 shares of GACL for every 5 shares held by them. Based on yesterday''s closing prices of the 2 stocks on the BSE, the merger ratio is favourable to shareholders of ACEL.

Listed only on the BSE, 97 per cent of ACEL is currently held by Ambuja Cements India Limited (ACIL) and the balance is with the public. Holcim owns two-thirds of ACIL while the balance one-third is held by GACL.

Subsequent to the merger, Holcim''s stake in GACL would go up to 24 per cent. It is likely that Holcim would raise its stake to above 26 per cent through the creeping acquisition route.

Holcim had acquired a 14.8 per cent stake in GACL early this year and had come out with an open offer for an additional 20 per cent. The open offer, which closed on 24 April, elicited very poor response from shareholders as the offer price was considerably lower than the market price.

ACEL has its manufacturing facilities in the Eastern states of the country and focuses more on the states of West Bengal and Chattisgharh. Subsequent to the merger, GACL''s total cement manufacturing capacity would increase to 16-million tonnes per annum.

Holcim has nominated Markus Akermann, Paul Hugentobler and Nirmalya Kumar as additional directors of Gujarat Ambuja Cements. The GACL board yesterday has approved their appointment.

Holcim also controls ACC, the single-largest cement company in the country, through ACIL which owns one-third of ACC. It is widely expected that, as the final step in consolidation of Holcim''s businesses, ACC and GACL would be merged in future.