Birla Corp to buy two cement units of Lafarge in India

MP Birla group firm Birla Corp will buy two cement plants of LafargeHolcim located in the eastern region of the country at an enterprise value of Rs 5,000 crore ($769.4 million), it said on Monday. It did not give a break-up of the equity component and the debt on the books of the two units.

Earlier in May, Indian anti-trust authority Competition Commission of India (CCI) had asked French cement producer Lafarge to sell the two units, located at Jojobera (Jharkhand) and Sonadih (Chhattisgarh), as a condition to allow its Indian leg of the global merger with Holcim. It had asked Holcim and Lafarge to return with modifications to their merger proposal in India after finding a suitable buyer for the plants within six months.

Lafarge and Holcim merged internationally last month to create the world's top cement producer, though they remain separate legal entities in India. Lafarge is also buying out Baring Private Equity Asia's minority stake in its Indian arm.

The two plants have a combined capacity of 5.15 million tonnes per annum (MTPA) and they manufacture cement under the brands Concreto and PSC. The deal involves transfer of the two brands too.

The Sonadih plant is an integrated cement manufacturing unit while Jojobera unit is a cement grinding plant.

"The business together, with the Concreto and PSC brands, perfectly fit into our strategic vision and ambition of enhancing our competitiveness in our chosen markets," said Harsh Lodha, chairman of Birla Corp.

Birla Corp is a part of MP Birla Group which has a presence across cement and jute. The company has cement units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal and produces 10 MTPA. The deal significantly enhances its presence in eastern India.

The transaction, which values the units at Rs 9,708 or $150 per per tonne would be funded through existing cash reserves and incremental debt.

Birla Corp shares rocketed on the deal announcement and were trading at Rs 526.55 each, up 16.5 per cent on BSE at1:36PM in a weak Mumbai market on Monday.

The asset sale would push back LafargeHolcim a tad behind UltraTech, the country's top cement producer promoted by AV Birla Group. UltraTech last year signed a deal to buy two plants from Jaiprakash Associates to take its capacity to around 65 million tonnes a year.

In India, Holcim operates through subsidiaries ACC and Ambuja Cements, while Lafarge's units include Lafarge India and Lafarge Aggregates & Concrete. The total cement manufacturing capacity of Holcim and Lafarge in India was about 67 million tonnes (MTPA) in 2013-14.

Lafarge had forayed into the Indian cement market in 1999 with the acquisition of Tata Steel's cement activity. Later it acquired the plant of Raymond Industries in Chhattisgarh and snapped L&T's concrete business.

It has plants in Chhattisgarh, Jharkhand, Bihar, West Bengal and Rajasthan and had recently commissioned an integrated cement plant in Rajasthan with a split blending unit in Haryana with a combined installed capacity of 2.6 metric tonnes per annum (MTPA). As on September 2014, Lafarge India had a capacity of 11 MTPA.

KRISCORE Financial Advisors and SBI Capital Markets Ltd were financial advisors and Nishith Desai Associates acted as counsel to Birla Corp for this transaction.

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