Lafarge gets revised divestment order from competition watchdog

By Anuradha Verma

  • 09 Feb 2016
Reuters | Credit: Reuters

LafargeHolcim, the world's biggest cement maker, said on Tuesday it has received a revised order from the Competition Commission of India (CCI) to offload its stake in Lafarge’s India operations that include three cements factories and two grinding plants.

“The proposed transaction is an alternate remedy for the merger of the group's legacy companies and now forms part of the company's 3.5 billion Swiss franc ($3.54 billion) divestment target in 2016,” LafargeHolcim said in a statement.

The group will now launch a new divestment process for Lafarge India, it said without elaborating.

The announcement came after the company said last week that it was considering a revised divestment plan in India and had submitted a new proposal to the competition watchdog.

LafargeHolcim was formed after the global merger of French cement maker Lafarge and Switzerland’s Holcim. To complete the merger in the country, the CCI had asked the combined company to divest some assets.

Lafarge India Pvt Ltd has an annual cement capacity of around 11 million tonnes. Holcim also owns controlling stakes in cement makers ACC Ltd and Ambuja Cements Ltd.

The cement maker will continue to operate in India through ACC and Ambuja Cements with a combined cement capacity of around 63 million tonnes and a wide distribution network in the country.

The move comes after a deal to sell part of the business to Birla Corp fell through due to regulatory issues.

In August last year, Lafarge India struck a deal with Birla Corp to sell its cement plants at Jojobera in Jharkhand and Sonadih in Chhattisgarh for an enterprise value of Rs 5,000 crore. The two plants have a total capacity of 5.1 million tonnes.

The deal, however, was contingent on the CCI’s approval as well as transfer of mining rights for the two plants.

Birla Corp, the flagship firm of the MP Birla Group, has threatened to take legal action against Lafarge India for its inability to complete the deal.

LafargeHolcim had cited regulatory issues relating to the transfer of mining rights needed by the two plants as the reason why it had to submit an alternate remedy to the CCI to ensure compliance with an original order it had got in April 2015.

The acquisition would have helped Birla Corp consolidate its position in the eastern India market. The firm has a total operational cement capacity of about 10 million tonnes a year with units in Rajasthan, Madhya Pradesh, Uttar Pradesh and West Bengal. Its capacity will increase to 15.6 million tonnes after the company last week agreed to acquire Reliance Infrastructure Ltd’s cement unit for Rs 4,800 crore.