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CCI clears Holcim-Lafarge merger with riders, asks Lafarge to sell two plants

The Indian anti-trust authority Competition Commission of India (CCI) has given its consent to the Indian leg of the proposed $44 billion merger between France's Lafarge SA and Swiss peer Holcim, which would create the world's largest cement company by manufacturing capacity and sales, according to a statement.

The approval, however, comes with certain riders, including divestment of two cement plants - Lafarge's Jojobera plant in Jharkhand and the company's integrated unit at Sonadih in Chhattisgarh - to eliminate competition concerns. These two units together have a capacity of 5.15 million tonnes per annum.

The two firms were assessed for possible impact on competition in two regions—north-west and eastern India. It found the merger not impacting competition in the north-west region but said the combination would have around 37 per cent of the capacity in the eastern region which raises concerns. In Jharkhand, the combined firm would have 79 per cent capacity and could affect the market, CCI noted.

Now, Holcim and Lafarge will have to go back to CCI after modifications within six months. In case they are not able to find a suitable buyer for the plants, they will get a second divestment period.

Last month, the two companies agreed to revise terms of the global merger of equals on a new exchange ratio of nine Holcim shares for 10 Lafarge shares, after Holcim said that the combination agreement can no longer be pursued in its present form due to the differing performances of the groups since the deal was sealed.

The deal was announced in April 2014 and the combined group would be based in Switzerland and listed in Zurich and Paris. The global merger, the industry's biggest-ever such deal, is expected to be completed in the first half of 2015.

The proposed deal would create the world's largest cement maker and the combined organisation would also overtake AV Birla's UltraTech to become the largest cement producer in India.

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 in 2008, Lafarge also acquired L&T's concrete business.

The company 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.

Lafarge's Indian arm counts Baring PE Asia is an investor.

Holcim had last month decided to restrict the agenda for the scheduled annual general meeting on April 13, 2015, due to pending antitrust clearance in the US and India.

(Edited by Joby Puthuparampil Johnson)

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