Birla Corp to buy two cement plants in eastern India from LafargeHolcim for Rs5,000 cr
18 August 2015
Birla Corporation, part of the MP Birla Group, yesterday struck a deal to buy two cement plants in eastern India from LafargeHolcim for Rs5,000 crore ($767 million) as a part of regulatory requirement for the merger of the two European cement giants.
The sale includes cement plants in Jojobera in Jharkhand and Sonadih in Chhattisgarh operated by Lafarge India with a combined annual capacity of 5.15 million tons, along with Concreto and PSC brands.
The deal is subject to approval of Competition Commission of India (CCI) and other relevant regulatory approvals.
Birla Corp, which will fund the transaction with cash in hand and incremental debt, said that post closing, the company will have a total capacity of 15 mtpa.
Kolkata-based Birla Corp currently has seven plants in Madhya Pradesh, Rajasthan, West Bengal and Uttar Pradesh with a total capacity of 10 mtpa.
"The acquisition business together with the Concreto and PSC brands perfectly fit into our strategic vision and ambition of enhancing our competitiveness in our chosen markets," said Harsh Lodha, chairman of Birla Corp.
LafargeHolcim said in a release that it will use the proceeds from the sale to further reduce debt.
In April last year, Holcim and Lafarge, two of the world's biggest cement companies, agreed to merge, creating the world's biggest cement maker, with a market cap of $50 billion and annual sales of nearly $43 billion (See: Cement giants Holcim and Lafarge announce merger of equals).
The mega deal requires approval from regulators in around 17 countries, including from Europe, Canada, the US, Brazil, India, Serbia, Romania, Hungary, Morocco, Philippines and China.
But both companies would have to sell assets worth more than $11 billion is several countries mainly in Slovakia, France, Romania, Germany, the UK, India, the US, Canada, Brazil and the Philippines, to overcome regulatory concerns.
The Indian regulator Competition Commission of India (CCI) had earlier directed both companies to publish details of the merger to the knowledge of the public and rival companies that may be affected or likely to be affected by such combination.
In April this year, CCI approved the Holcim-Lafarge merger on condition that they sell these two cement plants to a company that does not have any ''structural or financial links'' with any existing cement producer in the relevant market.
The transaction with Birla Corp will be submitted to the CCI for approval and is subject to other regulatory approvals and customary conditions, the release said.
''India is an important market for LafargeHolcim with a balanced portfolio in cement, aggregates, and ready-mix concrete. Following the divestment, the group will have a cement capacity of around 68 million tonnes in India.
The new company aims to save €1.4 billion ($1.55 billion) within three years as a result of the merger that formed the biggest cement producer in the world.
With operations in cement, aggregates and concrete and a presence in 90 countries, LafargeHolcim is the world leader in the building materials industry. The Group had 115,000 employees around the world and combined net sales of CHF 33 billion (€27 billion) in 2014.