Both the parties have mutually agreed to exclude the Shahabad plant in Karnataka from the transaction. The total enterprise value is Rs 15,900 crore.
Debt-ridden Jaiprakash Associates has sold off part of its cement business to the Kumar Mangalam Birla-led UltraTech for Rs 15,900 crore, marking the biggest consolidation in the cement sector by end of March 2016.
The size of the deal has been reduced from Rs 16,500 crore as Jaiprakash Associates Ltd (JAL) decided not to sell its cement plant in Karnataka with a capacity of 1.2 million tonnes per annum (mtpa).
The cement business comprises plants with an aggregate capacity of 17.2 mtpa spread over the states of Uttar Pradesh, Madhya Pradesh, Himachal Pradesh, Uttarakhand and Andhra Pradesh, besides a grinding unit of 4 mtpa capacity, which is currently under implementation in UP.
Both the parties have mutually agreed to exclude the Shahabad plant in Karnataka from the transaction.
´The total enterprise value is Rs 15,900 crore and additional amount of Rs 470 crore shall be paid by UTCL for completion of the grinding unit under implementation,´a communication said.
The deal will help JP Associates reduce its debt, which runs into thousands of crores of rupees.
The transaction is subject to various regulatory approvals including stock exchanges, Competition Commission of India, shareholders and creditors as well as sanction of scheme of arrangement by the High Courts of Bombay and Allahabad.
´The consummation of the transaction is expected to take 9-12 months,´ JAL said in the filing.
Post the deal, JAL will retain 10.6 mtpa cement capacity spread over the states of Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka.
These sales have helped bring down debt to some extent. ICICI Bank has actively worked with the management of Jaypee to sell its entire cement business and this business is now being sold to the Aditya Birla group, JAL added.
In a separate filing, UltraTech Cements Ltd (UCTL) said: ´Upon consummation, UltraTech´s cement capacity will stand augmented to 91.1 mtpa including its overseas operations.´
It however said that the acquisition is expected to take around 12-14 months to consummate and is subject to receipt of applicable statutory/regulatory approvals.
Blackstone, JSW and Ramco submit bid for LafargeHolcim´s cement assets Private equity giant Blackstone and the Sajjan Jindal-led JSW Cement are among the bidders for LafargeHolcim´s Indian cement assets worth Rs 10,000 crore. ´JSW Cement, Blackstone and Ramco Cements have submitted bids to acquire LafargeHolcim´s 11 mtpa cement capacity, which is worth around Rs 10,000 crore.
The bidders are looking for partners to acquire the cement assets,´sources said. Ireland-based building material group CRH Plc has also shown ´strong interest´ in acquiring LafargeHolcim´s Indian assets, they said, but did not elaborate whether the group has submitted a bid for it. In February, Swiss cement giant LafargeHolcim said it has got fair trade regulator CCI´s approval for a new divestment plan for its India business. LafargeHolcim is selling its three cement plants and two grinding stations with a capacity of 11 mtpa. It comprises an integrated cement unit at Sonadih (Chhattisgarh) and a cement grinding unit at Jojobera (Jharkhand). Earlier Birla Corp was to acquire Lafarge´s cement business along with Concreto and PSC brands.
COMPAT stops sale of LafargeHolcim´s sale of assets in India
The Competition Appellate Tribunal (COMPAT), in an appeal preferred by Dalmia Cement (Bharat) Limited (Dalmia) has stayed the sale of Franco-Swiss cement maker LafargeHolcim´s 11-million tonne (mnt) cement capacity in India held under Lafarge India Pvt Limited.
The sale of Lafarge India´s shareholding was made in pursuance of an order passed on 2 February 2016 by the competition regulator, Competition Commission of India (CCI). COMPAT passed an interim order staying the operation of the order dated 2 February 2016.
COMPAT also pointed out that the CCI had no jurisdiction to entertain an alternative proposal submitted by the parties or pass the order dated 2 February 2016.
The CCI had earlier by a final order dated 30 March 2015, directed that the merger between Holcim Limited and Lafage S.A. would have an appreciable adverse effect on the market for grey cement in eastern India (comprising the states of Chhattisgarh, Odisha, Jharkhand, Bihar and West Bengal) and as such directed the parties to divest two plants owned by Lafarge viz., the Sonadih plant and the Jojobera plant. The CCI further directed that the third party acquiring the two plants should not have installed capacity exceeding 5 per cent of the total installed capacity in the eastern region. The approval to the merger was subject to successful divestment by the parties.
It appears that the parties were unable to implement the above stated direction of divestiture and instead offered to sell the entire of Lafarge´s India business. The CCI by its order dated 2 February 2016 approved this new proposal. Dalmia filed an appeal before the COMPAT on 5 April 2016 challenging the validity of the order dated 2 February 2016 on the ground that CCI has no jurisdiction to approve a new approval after a final order approving a combination subject to modifications has been passed under Section 31 of the Act. It also challenged the extension of the 5 per cent restriction in the initial order applicable to the sale of the two plants to the sale of entire India business ´ which has barred many existing players from bidding for Lafarge India Pvt Ltd´s shareholding.
The COMPAT agreed with Dalmia that the CCI had no jurisdiction to pass the order and the parties do not have the power to move any application for suggesting changes to a modification approved by a final order under Section 31 of the Act. The COMPAT has granted interim relief staying the operation of the order dated 2 February 2016, thereby staying the sale of the shareholding of Lafarge India Pvt. Ltd.
Ajay Piramal invests Rs 256 cr in Sanghi Cement
Piramal Enterprises has invested Rs 256 crore in Sanghi Industries, a Kutch-based cement company with production capacity of 4.1 million tonnes a year (mtpa). The investment made through non-convertible debentures would enable Sanghi to repay some of its debts ahead of schedule and save on interest outgo. Earlier, Ajay Piramal had shown interest in bidding for the 11 mtpa cement asset put on the block by Lafarge. Ever since Piramal sold his flagship pharma business for a whopping $3.8 billion some six years ago, he has been scouting for investment opportunities and now seems bullish on the cement sector on the back of the governmentGÇÖs enhanced spending in infrastructure.
Sanghi Industries´ production capacity accounts for about 16 per cent of Gujarat´s production capacity. It also plans to add another 4 mtpa on the surplus land at its existing plant. The capacity addition would be made at a competitive cost of less than $50 a tonne, said Sanghi Industries in a statement.
Mining Act amended, to boost M&A
The Rajya Sabha has amended the Mining Act to allow transfer (versus auction previously) of captive mining leases (which were granted prior to auction). This action was already approved by the Lok Sabha. The draft change to the MMDR (Mining) Act 2015 as introduced in the Lok Sabha in March 2016 is:
´Provided that where a mining lease has been granted otherwise than through auction and where mineral from such mining lease is being used for captive purpose, such mining lease may be permitted to be transferred subject to compliance of such terms and conditions and payment of such amount or transfer charges as may be prescribed.´ The passage of this amendment would facilitate M&A in the broader cement/metals/mining/steel sectors. This could now facilitate pending deals, including the $2.5 bn acquisition of cement assets announced by UltraTech in February 2016. Seven major M&A deals have been announced/completed in the last three years in the cement sector with a total capacity of 41 million tonne (10 per cent of total capacity) and a value of $4.3 bn.