Dublin-based CRH, the world's third largest building materials company, has jumped into the fray to bid for Lafarge India's cement business with annual capacity of 11 million tonnes (mt). Last year the Irish company acquired assets worth $7 billion as Holcim and Lafarge divested assets worldwide to meet anti-trust regulations to complete their global merger.
Both CRH and Lafarge India declined to comment to an e-mailed questionnaire.
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 Cement and ACC, has 60 mt of capacity. Lafarge has capacity of 11 mt 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 a little more than 40 per cent of the estimated 46 mt of total capacity in the region.
The Competition Commission of India (CCI) asked Lafarge India to sell its 5.15 mt capacity in eastern India by December 31 to complete its global merger.
In August 2015, Birla Corp 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 Corp being able to secure the mining rights Lafarge had. The deal failed as Birla Corp could not secure mining licences. This prompted Lafarge to put its entire capacity on the block, as a share sale deal would result in getting the mining licences automatically transferred.
Lafarge India submitted a revised proposal to this effect early this year. But with chairperson Ashok Chawla retiring last week, CCI's approval for The new plan got delayed. With D K Sikri taking the charge of the anti-trust body, the process is expected to be completed soon. "All the formalities are complete and we are expecting approval to Lafarge's proposal very soon," said a source in CCI. CRH has appointed one of the top four audit firms to advise it for the coming bid.
The advisory business of this global audit firm is preparing the proposal for the bid. "This deal is tailor-made for CRH as it has acquired Holcim-Lafarge assets globally," said a banker familiar with the development.
CRH has presence in the Indian market; it had acquired 50 per cent stake in Hyderabad based My Home Industries (MHIL) in 2008. MHIL has an annual cement capacity of 4.8 mt from two plants and is the lowest cost producer and a leading player in its market. In 2013, MHIL acquired South India-based Sree Jayajothi Cements which had an enterprise value of Rs 1,400 crore for its 3.2 mt capacity.
However the bidding for Lafarge's assets in India is expected to be a tough fight with continued interest from strategic players such as Birla Corp, JSW Cement and increasing interest from private equity players such as Blackstone, say sources.