Cement mergers and acquisitions stumble on valuations

Cement mergers and acquisitions stumble on valuations

Vikas Damle

The Swiss gaint Holcim AG, the largest cement manufacturer in the world, has been aggressively hunting in Rajasthan for an acquisition. The company was in negotiation with RK Marbles-owned Wonder Cement. The company has a capacity of 2.5-3 million tonne per annum and limestone reserves for a possible buyout but nothing concrete has emerged, since RK Marbles is looking at higher valuations that Holcim is not willing to shell out. The negotiation could not be concluded successfully as the Holcim is not ready to pay more than $120-130 per tonne. RK Marbles will certainly wait as none of the players in that region are ready to shell out at such valuations now. Smaller players in the south are asking for $150-160 per tonne, which the buyer is likely to pay as it seems to be impossible under present market conditions. "Sure, these players are now able to increase prices but by the time monsoon arrives in three months, prices will decline," says an analyst. The buyers will wait for the valuation to fall, and will be hoping that the monsoon will be a good harbinger. The average value of cement acquisitions between 2005 and 2008 was $168 per tonne compared with $121 per tonne a decade before that. Holcim AG holds controlling stake in both India cement major - ACC and UltraTech.

Indian Cement Review