29/08/2016
Lafarge to sell India assets to Nirma for $1.4 billion
MUMBAI: Nirma, a small, regional cement player headquartered in Ahmedabad trumped the bigger boys of India Inc Ajay Piramal and Sajjan Jindal led JSW Cement to scoop up one of the most prized cement portfolio in the country -- the 11 million tonnes per annum.(MTPA) Lafarge India.
LafargeHolcim on Monday announced it has entered into a letter agreement with Nirma Limited subject to approval by the Competition Commission of India (CCI) for the divestment of its interest in Lafarge India for an enterprise value of approximately $1.4 billion. Lafarge India operates three cement plants and two grinding stations with a total capacity of around 11 million tonnes per annum. The company also markets aggregates and is one of India's leading ready-mix concrete manufacturers. The proceeds from the divestment will be used to reduce debt further.
"This agreement is an important step in our CHF 3.5 billion divestment program. With this deal, two thirds of the program has been secured and the remainder of the program is well on track. We are confident that we will meet our target by the end of this year. With the proposed buyer we have found the right partner who will be able to develop the business further in the interest of all our stakeholders," said Eric Olsen, CEO.
LafargeHolcim will continue to operate in India through its subsidiaries ACC Ltd. and Ambuja Cements Ltd. with a combined cement capacity of more than 60 million tonnes and a distribution network that extends across the entire country.
The transaction with Nirma Limited as a purchaser will be submitted to the CCI for approval.
Nirma, known more for its FMCG, soda ash and chemicals business has been trying to scale its cement operations for a while but faced challenges when their 2 MTPA plant in Gujarat got stuck due to land acquisition issues. They have a 2 MTPA plant in Rajasthan currently and sell cement under the Nirma brand name across north and west India. Lafarge will help them leapfrog in one shot to emerge as a mid- sized player across east, north and western India.
ET has been reporting since July 4th that Nirma had emerged as the highest bidder. Sources said even after the shortlisted candidates revised their offers, Nirma out bidded both their rivals. Nirma is being financed by Credit Suisse, BNP Paribas, Barclays and IDFC.
With the competition regulator - Competition Commission of India - barring several leading industry players and marque private equity funds from participating in the competitive process to avoid market dominance, it had become an unique opportunity for relative newer entrants like JSW or debutants like Piramals or even multinational corporations with no India footprint to leverage this opportunity and join the big league.
Earlier this February, LafargeHolcim had agreed to sell its entire 11 million tonnes per annum India operations after regulatory hurdle over transfer of mines came in between its earlier plans to divest just two of its assets to Birla Corp for Rs 5000 crore. Exiting the entire business was alternate remedy for the merger of LafargeHolcim's legacy Indian operations.
LafargeHolcim has a divestment target of CHF 3.5 billion in 2016 and has already completed the sale of its business in South Korea and signed an agreement to divest its minority shareholding in Saudi Arabia. The Group has also expanded its joint-venture with SNI, its historical partner in Morocco, by merging Lafarge Ciments Maroc and Holcim Maroc to create LafargeHolcim Maroc.
