Sale of Holcim units in India to be delayed

Holcim rejects Euro 42 bn merger with Lafarge

The Holcim board on Monday rejected the terms of merger agreed last year with Lafarge and said the agreement needed to be re-negotiated.

If the merger of the two European cement companies were to be delayed, the sale of a few Indian units of the merged entity, necessary to obtain approval from the Competition Commission of India, would be held up, analysts said.

This is good news for Indian cement companies such as  UltraTech and Shree Cement, which would have faced competition from the merged Holcim-Lafarge.

Holcim in India is represented by ACC and Ambuja Cement, with 60 million tonne capacity, while Lafarge has four plants with a capacity of 11 million tonnes. The merger is pending with the Competition Commission and bankers said Indian companies were eyeing the cement units the merged entity would have to divest in east India.

STUCK IN CEMENT

• The Holcim board on Monday rejected the terms of merger agreed last year with Lafarge
• It said the pact needed to be re-negotiated
• If the merger were delayed, the sale of a few Indian units of the merged entity would be held up

Almost 70 per cent of Lafarge’s Indian capacity is in Chhattisgarh, Jharkhand, and West Bengal. ACC and Ambuja Cement also have above 10 million tonne capacity in these states.

Analysts said the merger would present Holcim-Lafarge over 40 per cent of the estimated 46-million-tonne capacity in east India, leading to a scrutiny of the deal by antitrust authorities. They said Lafarge might have to shed two-three million tonnes of capacity in that region for the merger to be accepted by the Competition Commission.

Holcim said on Monday the agreement with Lafarge had to be renegotiated for the exchange ratio and the governance issues. "Lafarge has indicated it refuses to renegotiate, except the exchange ratio. Further details will be communicated in due course," the Swiss company said.

Announcing the merger on July 7, 2014, the companies had said Holcim-Lafarge would have annual sales of $44 billion, a significant industrial base in Europe, operations in 40 countries and savings of euro 1.4 billion a year. The deal was meant to be closed before June.

As part of the merger plan, Holcim and Lafarge had announced a list of plants they would need to sell to comply with antitrust regulations across the world. The companies had proposed to sell cement plants in Austria, France, Germany, Hungary, Romania, Serbia, the UK, Canada, Mauritius, the Philippines, and Brazil.

The sale of the Indian units are pending as the Competition Commission has not given its verdict.