The Cabinet Committee on Economic Affairs (CCEA) on Wednesday paved the way for Ambuja Cements to acquire a 24 per cent stake in its holding company, Holcim (India), a move which would lead to an outflow of Rs 3,500 crore from India and be a precursor to reverse merger through a share swap. The reverse merger was also given a go-ahead by the CCEA.
The proposal, cleared by the CCEA, allows Ambuja Cements to buy the stake from Holderind Investment Limited.
These transactions would enable LafargeHolcim Group to create a linear corporate structure (with Ambuja and ACC becoming parent and subsidiary) with a view to harvesting significant synergies from India operations.
“This will further strengthen all India footprints, debt-free balance sheet and cash flow generation, bringing in huge prospects for further expansion and creation of employment opportunities,” a government statement said here.
According to a complex arrangement announced in August 2013 by Holcim, in a two-step process, Ambuja Cements was to acquire 24 per cent in Holcim India — a wholly owned financial holding company of Holcim — for Rs 3,500 crore — followed by a stock merger between the two.
Currently, Holcim India directly holds 9.76 per cent stake in Ambuja and 50.01 per cent in ACC.
After the merger, Holcim India’s stake in Ambuja will stand cancelled and Ambuja will own 50.01 per cent stake in ACC. With this, Holcim's stake in Ambuja Cements will rise from 50.55 per cent to 61.39 per cent. Ambuja, in turn, will buy Holcim's stake in ACC. In other words, once the deal is done, ACC will become a subsidiary of Ambuja Cements.
But, before this transaction could get over, Holcim and LaFarge announced a global merger in 2014 that necessitated sale of cement units by Lafarge last week.
Holcim India is a holding company of ACC and Ambuja Cements. Such a change in structure was the outcome of Lafarge SA and Holcim Group wanting to restructure their businesses in India after their global merger in 2014 to form a merged entity, LafargeHolcim. The complexity is involved in integrating their large firms in India, Holcim's ACC and Ambuja Cements with Lafarge India.
Holcim (India) and Holderind Investments hold 50.80 per cent stake in Ambuja Cements as on June 30, 2016, while Holcim (India) and Holderind Investments own 50.34 per cent stake in ACC.
Ambuja Cements shares were down 0.11 per cent at Rs 262.20 on the BSE on Wednesday, while ACC shares were up 1.85 per cent at Rs 1,633.50. On July 11, Lafarge had sold its India assets to Ahmedabad-based Nirma for Rs 9,700 crore so as to meet India’s competition commission laws.
Analysts said with the transaction finally getting the government approval, Ambuja will attract holding company discount in the stock exchanges like Grasim which holds stake in rival UltraTech.
OTHER DECISIONS
- Over a year after the Rajya Sabha approved a private member's Bill to protect the rights of transgenders, the Cabinet cleared a similar legislation to protect such persons from discrimination. The Transgender Persons (Protection of Rights) Bill 2016 may be introduced in the ongoing session of Parliament.
- Signing of an Air Services Agreement (ASA) between India and Mozambique
- A skill development agreement signed between India and Swiss Confederation
- Nearly Rs 9,200 crore to procure 550,000 new ballot units and 545,000 control units during 2016-17
- Agreement with Tunisia for strengthening bilateral cooperation in the field of IT, telecom and digital economy
