Shareholders may not gain from Holcim rejig plan soon: Analysts

Swiss firm Holcim's move to restructure shareholding in its India units -- ACC Ltd and Ambuja Cements is unlikely to benefit minority shareholders in the near-term, brokerage firms said today.

"We believe the shareholders of two companies will reap no benefit from this scheme of amalgamation in the near-term. This amalgamation is extremely negative for Ambuja as it will have to shell out Rs 3,500 cash," Centrum Broking said in a report.

Last evening, Holcim proposed restructuring of its Indian operations by merging subsidiary Holcim India with Ambuja and transfering Holcim India's 50.01% stake in ACC to Ambuja, making it holding company of ACC. Post merger, Holcim will have 61.39% stake in Ambuja.

"This transaction is certainly an immediate negative and detrimental to minority shareholders of Ambuja," said Phillip Capital (India).

Stating valuation of the deal is fair, IIFL Institutional Equities said," We believe minority shareholders of Ambuja Cements are left with reduced balance sheet strength, increase in share of cement assets in weak regions and comparatively inefficient plants."

ICICI Direct said restructuring of operations featuring a hike in stake in Ambuja Cements and making ACC a subsidiary would not go well for shareholders of Ambuja.

"This is because it involves transfer of nearly all the cash on the books of Ambuja Cements to the parent Holcim and issuance of shares to the promoter Holcim for merger of Holcim India, which has a 50% stake in ACC," it said.

Centrum almost countered management's claim that the deal would accrue Rs 900 crore synergy benefit, saying," We believe that post Holcim acquiring management control in 2006, most of the synergies between the companies have already been achieved in terms of procurement of raw material, coal, packaging materials, stores and spares etc."

Supporting Holcim's moves, Motilal Oswal Securities said the merger would be marginally EPS (earnings per share) and RoCE (return on capital employed) accretive for Ambuja even without synergistic benefits and renders further upgrade potential on achieving synergies.

Following the transaction, Holcim's ownership of ACC will be through Ambuja Cements as against earlier through its unlisted subsidiary, Holcim India. Ambuja would have to pay Rs 3,500 crore to Holcim as well as issue 58.40 crore equity shares to Holcim.

Reacting to the two-stage deal which was announced after markets closed yesterday, shares of Ambuja Cements tanked by nearly 11% and scrips of ACC fell by 3%.

Holcim, however, said this transaction further improves its holding structure in India, strengthens the platform for future growth and is expected to generate synergy benefits of Rs 900 crore per annum.

"These benefits, which will be realised in a phased manner over two years, will be shared by both companies equally through supply chain," Holcim CEO Bernard Fontana said yesterday.