Ambuja acquisition could be LIC's windfall; acquirer to make open offer

A big bonanza awaits Life Insurance Corporation (LIC) of India, which owns a minority stake of Rs 7,047 crore in both Ambuja Cements and in its subsidiary ACC, with a new owner taking over India’s second-largest cement company.

LIC owns 6.3 per cent stake worth Rs 4,602 crore in Ambuja Cements and 5.66 per cent stake worth Rs 2,445 crore in ACC.

Banking sources say LIC and other shareholders will have the option to exit both companies at a huge profit once the acquirer makes an open offer for them.

Last week, Adani Group and JSW Group submitted non-binding bids for Ambuja Cements to its Swiss parent, Holcim.

India’s largest cement major, UltraTech Cement, is also in the race. But bankers said due to potential objections from the Competition Commission of India, its offer may not be favoured since Holcim wants a quick exit.

After the acquisition of Holcim’s stake, the acquirer will have to make an open offer to the rest of the shareholders in keeping with the Securities and Exchange Board of India rules. Bankers said it would give LIC an opportunity to exit at a profit.

“LIC has been holding these shares for a long time. When the open offers are made, they can exit companies, along with other minority shareholders,” said a banker.

LIC did not reply to an emailed questionnaire until the time of going to press.

The acquirer will pay around $6 billion (based on Wednesday’s share price) to buy the 63 per cent stake held by Holcim in Ambuja Cements. The acquirer will have to spend another $4 billion for buying shares in the open offers for both Ambuja Cements and ACC.

Shares of Ambuja Cements closed 3 per cent down at Rs 368 per share on Wednesday, giving it a total market value of Rs 73,000 crore.

Shares of ACC closed 1.6 per cent down to Rs 2,309 per share, with a total valuation of Rs 43,368 crore.

The BSE Sensex closed 2.2 per cent down after the Reserve Bank of India hiked interest rates.

Bankers said all bidders have stitched up funds for the transaction with Adani tying up with West East-based sovereign funds.

JSW Group is getting a clutch of private equity firms to back the transaction.

UltraTech Cement will not have any problem raising funds for the transaction, said a Birla Group source.