Piramal, Nirma in last lap for Lafarge

Piramal and Nirma have emerged as two final contestants for Lafarge India’s 11-million tonne (mt) cement business as the last leg of discussion continues in London. Foreign bidders, including Mexico’s Cemex and China’s Anhui Conch Cement Company, are believed to have stepped out of the race. Also, JSW Cement, which has partnered private equity firms for the bid, has emerged a conservative bidder. 
 

“The deal is expected to close at about Rs 8,000 crore as a large part of Lafarge’s 11-mt capacity are old facilities,” said a banker, familiar with the bidders in final discussion with Lafarge. The winning bidder is expected to be finalised by the French company early next week. Once the winning bid is decided, an exclusivity agreement will be signed with the bidder for about three months to complete the deal. 
 

Lafarge India had submitted a revised proposal to the Competition Commission of India (CCI) to sell its entire 11-mt asset in India. This decision came after the company’s plan to sell its 5.15-mt cement capacity in Chhattisgarh and Jharkhand to Birla Corporation for Rs 5,000 crore ran into trouble. Investment bankers said the MP Birla Group company was facing challenges in securing limestone mining rights for the two units. 
 

France-based Lafarge and Swiss cement giant Holcim announced a global merger in April 2014 to create the world’s largest cement company. This raised eyebrows of anti-trust watchdogs in several countries. 
 

In India, Holcim, through its control of Ambuja Cements and ACC, has 60 mt of annual capacity. Lafarge, on the other hand, has 11 mt capacity in India, of which 7.8 mt (70 per cent) is in Chhattisgarh, Jharkhand and West Bengal. Holcim’s ACC and Ambuja have capacities of 6.1 mt and 4.6 mt, respectively, in India’s eastern region. 
 

A simple merger would have led to a capacity of 18.5 mt in the eastern states for Holcim-Lafarge, which would have been 40 per cent of the estimated 46 mt of total capacity in the region. This led to scrutiny by the CCI. 
 

CCI had asked Lafarge India to sell its 5.15 mt capacity in eastern India by December 31, 2015 to complete its global merger. 
 

In August 2015, Birla Corporation had agreed to buy the proposed assets along with brands Concreto and PSC, and mineral rights over adequate reserves of limestone. 
 

The deal was conditional on Birla Corporation being able to secure the mining rights that Lafarge had. Due to regulatory changes, the transfer of mining rights for an asset sale deal was not allowed. 
 

Lafarge India, then, put the entire company on the block because such a sale allows transfer of mining rights.