CCI approves Ultratech's Rs3,800-cr deal to acquire Jaypee's Gujarat facilities
24 December 2013
The Competition Commission of India (CCI) has approved Aditya Birla Group firm Ultratech's deal to acquire Jaypee Cement Corporation's facilities in Gujarat for nearly Rs3,800 crore.
The fair trade regulator has ruled that the transaction does not raise concerns of unfair competition.
The CCI order, released on Monday, said the regulator "is of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India".
Jaypee's cement unit in Gujarat comprises an integrated cement plant at Sewagram, limestone reserves, captive power plant and mining leases, among others.
CCI noted that with other major cement manufacturers like ABG Cement and Lafarge India planning to set up cement plants in the states of Gujarat and Rajasthan, respectively, Ultratech's acquisition of Jaypee's facilities in Gujarat is unlikely to mar competition.
CCI said the "entry of new firms is generally considered to counterbalance any attempt by the merging parties or their competitors to profit from the potential reduction in competition brought about by the merger".
"The new entrant, if of sufficient size, effectively disciplines the existing market participants, as size of the new entrant does matter in the markets characterised by few players," it said.
Ultratech had also submitted that it intended to introduce and "utilise its processes and core competence to increase the capacity utilisation of Jaypee's assets thereby increasing overall economic efficiency in production and increase the overall quantity of cement in the market for grey cement," CCI observed among other things.
"It has also been stated that the location of the target (Jaypee) assets will reduce lead time to customers," it added.
The deal, which was executed in September this year, however, will further cement UltraTech's No 1 position in the market and give it an entry into Gujarat.
For the Jaypee Group, it will help pare a portion of its Rs55,000-crore debt.