LafargeHolcim will continue to operate in India through its subsidiaries ACC Ltd and Ambuja Cements Ltd, with a combined cement capacity of about 60 million tonnes.
LafargeHolcim has agreed to sell Lafarge India Pvt Ltd to Nirma Ltd for $1.4 billion (Rs 9,400 crore), including debt. This deal will complete the India leg of the global merger of French cement giant Lafarge and Swiss building materials group Holcim.
The proceeds from the divestment will be used to reduce debt, said the world´s biggest cement maker. The deal is subject to approval by the Competition Commission of India (CCI).
The deal is part of the company´s 3.5 billion Swiss franc ($3.6 billion) divestment programme and is essential for completing the global merger announced last year between Lafarge and Holcim.
¨With this deal, two-thirds of the programme has been secured and the remainder of the program is well on track,¨ said LafargeHolcim CEO Eric Olsen. ¨We are confident that we will meet our target by the end of this year.¨
Ahmedabad-based Nirma is best known for making soaps and detergents, though it also makes industrial goods such as soda ash, cement and packaging products. It trumped companies such as the Piramal Group and JSW Group and a couple of foreign companies and private equity firms to clinch the deal. Founded by Karsanbhai Patel, Nirma has 12 manufacturing facilities in India and the US. The company had sales of about $1.1 billion in the year through March 2016.
LafargeHolcim had been trying to sell Lafarge India for the past year after the CCI, in April 2015, asked the company to divest some assets to complete the global merger. Nirma´s cement strategy so far was largely organic in nature, but it faced severe headwinds as plans to build a 2 MTPA Gujarat plant got mixed up in land acquisition related litigations. Lafarge was a great opportunity for Nirma to grab a profitable platform and scale up.
Lafarge has got itself a sweet deal, believes Anil Singhvi, Chairman of Ican Investments Advisors. Although the valuations of the deal look demanding, Singhvi believes this is because it is sale of a fine-tuned business and not cement assets.
China´s Anhui Conch Cement Co Ltd, the largest cement maker in mainland China, was the top bidder for Lafarge India, but lost out to eventual winner Nirma.
Interestingly, while Nirma agreed to buy the 11-million tonnes per annum assets of Lafarge India from LafargeHolcim for an enterprise value of $1.4 billion (around Rs 9,400 crore), Anhui Conch, with a bid of Rs 9,500 crore, was the highest bidder.
The sellers may have also looked at the nationality of the buyers. ¨Factors like the nationality of the bidder which provides maximum certainty in terms of getting regulatory sanctions/approvals also becomes a significant factor. Even more so when a deal has been triggered on account of certain regulatory requirements,¨ said Siddharth Shah, partner at Khaitan and Co, a law firm.